Mr Speaker, I move:

1. INTRODUCTION

More than ever before, South Africa today demands a Budget aimed at the needs of the people of this country—a Budget that creates better prospects of peace, progress and prosperity for those who seek to realise their ideals in this country and who to that end are ready to work and to sacrifice.

Seldom if ever in our history have order and stability, and developments in the constitutional, economic and social fields, been so intimately bound up together and their interaction so apparent as is the case today. The provision made in last year’s Budget for these four fields has been amply vindicated by events.

It is fitting, by way of introduction, to say a few words on each of these fields.

Those who last year felt acutely the need for security are today in no doubt that our capacity to uphold peace and stability and to ensure the integrity of our borders needs to be intensified rather than merely maintained. The needs of our security services will thus again make heavy demands on the available funds.

In the constitutional field the Government has set itself the task of bringing all reasonable people of all population groups in South Africa together in a constitutional dispensation that will both give expression to their aspirations and effectively protect minority groups. The realisation of this ideal will contribute to the further unlocking of the enormous development potential of this country and all its people. It will also help to release for development and upgrading some of the premium that South Africa, as a result of boycott actions, must now pay for essential supplies and technology. In this way more funds will be made available for development and upliftment. Those subscribing to these ideals will surely give their support to an appropriation of funds adequate for constitutional development in its broad context.

As to the other two fields, all reasonable South Africans realise that imaginative social and economic development provides a sound foundation for constitutional reform aimed at accommodating developed and developing communities in a conflict-averting structure.

Within the country’s economic capabilities this Budget is also in line with the undertaking given by the State President on 31 January this year during the opening of Parliament, namely when he said:

Last year’s claims on the social front were great. This year they are still greater. The medicine needed by the economy last year was a restrictive Budget; and State expenditure, on the four key fronts too, had therefore to be cut as far as possible, despite the needs then already evident. But at that stage the economy could simply not carry larger expenditure.

When, during the course of the financial year, it became possible to increase government expenditure—also due to the contribution made by our policies—the highest priority was at once given to socially-oriented activity, including training, work creation and even the supply of food parcels.

This year the economy needs moderate stimulation by the authorities—with the accent on moderate. The scope created for us as a country by last year’s sacrifices is of course constrained by our obligation to repay part of our foreign debt, without the prospect of significant new loans from that quarter; but even after this there is still some latitude for increased expenditure in the four key fields already mentioned. Any remaining leeway can then be used where it will help to blow new life into the economy in a healthy way.

Against the background of just claims to social upliftment, of the need for upgrading of the security services so as to equip them to perform their protective and preventive functions, and of the moderate stimulation of the economy, the Government remains acutely aware of its responsibility to apply sound economic principles.

The Government adheres to the view that economic development in South Africa must be based on the principle of private property and private initiative and that this base needs to be broadened. Markets should, through effective competition, play the leading role in this process. The Government itself must as far as possible limit its direct role in total economic activity to those functions where the market mechanism is not able to deliver the results sought.

Inasmuch then as this Budget is aimed primarily at the needs of the people of South Africa it gains support from the following three considerations:

The Government is acutely aware of, and has great understanding for, the disparities and backlogs that unfortunately are still found in various spheres in South Africa. Although the Government’s ability to satisfy the country’s manifold needs is limited, appreciable progress in several fields has nonetheless been made over several decades. One should simply look at where we stand today in comparison with only a few years ago. The economic growth required in order to meet these needs is greatly influenced, for better or worse, by internal and external factors alike. Considerable time will inevitably be needed to wipe out backlogs, particularly under such circumstances as rapid population growth.

Against this background I am particularly happy today to announce the Government’s intention of awarding a high priority, over the next three years at least, to expenditure aimed at work creation and the upgrading of skills, working capacity, and the quality of life of individuals and their communities. This project will also embrace the improvement of basic services in less-developed areas.

The Budget will therefore reinforce the program envisaged by the State President at the opening of Parliament and will also give further substance to his undertaking last year to improve the infrastructure in underdeveloped villages and towns through expenditure of R1 billion spread over five years. In a follow-up of the R100 million of this sum already spent on this purpose last year, it is possible in this Budget to make available for this same purpose a special amount of R320 million for the coming year. This should enable the Government to push the planned program through within three years in place of five.

The Budget also makes other provision, direct and indirect, for programs that contribute to the upliftment of Black people. When to this is added the amounts made available in other ways for infrastructure creation, such as the R300 million project already under way in the Eastern Cape and which is financed from the Local Authorities Loans Fund, the scope of the upgrading activity becomes even more apparent. The sums spent on further social upliftment, such as education, must also be taken into account.

The amounts appropriated by way of this initiative are regarded as being the maximum amounts that can be financed and expended in the present economic circumstances. As the economy picks up, however (measures to this end are also proposed in today’s Budget) and our privatisation initiative gathers momentum, the Government will be better placed to extend these programs.

This upgrading project is essentially a capital program aimed at helping people to help themselves. It should be clear that it is not a mere handout, but an investment in the people of South Africa—an investment in human and physical capital that will ultimately ensure the human dignity and progress of South Africans. From it there should also grow an increasingly dynamic informal sector, while the establishment of representative structures on local and higher levels should be substantially advanced.

The following quotations from the State President’s Address at the opening of Parliament this year bring into sharp focus the undertakings given by the Government in this regard:

To unlock this potential effectively, the supply of the necessary skills, deriving from suitable education and training, is an obvious prerequisite.

In the nature of things upliftment is not limited to Black people; and, so far as Whites, Coloureds and Asians are concerned, the appropriate information is included in the Own Affairs Budgets of the Houses concerned. Along with upliftment operations for developing communities it is equally important that there be provision for the maintenance of the quality of existing facilities and services in the highly developed sector. For example, highly-skilled manpower should be kept at such a level as to ensure the continued growth and development of the economy as a whole.

In the context of upliftment and development the following further quotations from the State President’s Address is of the utmost importance in the consideration of these budget proposals:

The actuality is, nonetheless, that in various parts of the world even trained people sometimes battle to obtain work and may remain unemployed for long periods. But nothing need stand in the way of anyone who wants to employ himself! The State President therefore announced on 31 January that legislation would be introduced this year to eliminate unnecessary restrictions on the development of entrepreneurship, particularly in the informal sector.

This brings one unavoidably to the question of the so-called redistribution of income. A morally and economically justified redistribution of income can be made only on the basis of achievement. Achievement in its turn is directly linked with opportunities—equal opportunities for education and for employment.

On 31 January the State President reaffirmed the Government’s commitment to equal opportunities for everyone in South Africa.

This step by the Government necessarily means that the Government’s declared short-term objective of significantly reducing public sector expenditure as a percentage of the gross domestic product will be more difficult to realise, in the next few years at any rate.

It is therefore not unreasonable to ask at once how the State is going to finance this upgrading and upliftment project.

Everyone, and particularly those who have a daily struggle trying to make ends meet, knows the shattering effect of continual price increases. To finance upgrading and upliftment in a manner that would fuel inflation and eventually lead to a new series of price increases is therefore not only absurd but could also deal the economy a crippling blow. Sound principles of finance are therefore a prerequisite for the long-term success of the upgrading project.

It is necessary to bear in mind that any economy has a maximum potential, which fluctuates from time to time. A thorough grasp of this inescapable truth helps one to distinguish between realistic hope and false expectations.

As far as the definition of capital expenditure is concerned, it is ironic that it includes spending on such things as a road or a building. Borrowing for such purposes is regarded as legitimate, inasmuch as posterity too will enjoy the benefit and should therefore help to bear the cost. On the other hand, all current expenditure on education is by definition not classifiable as capital, although in actuality it is an investment in the future, not only of the individual concerned but also of the whole country. Indeed, in this case it is the succeeding generation that will enjoy the greatest benefits ensuing from the contributions of better-trained citizens.

The Government, then, proposes a program of upliftment, extending over at least the next three years, that will give people, communities and regions alike a chance to get going and keep going. The exceptional success achieved by the special training program since October of last year, and the perception of the livelihood offered by the informal sector to thousands of people in different areas throughout South Africa, are striking testimony to the rewards of an investment in training and retraining.

To provide a broad and lasting basis for sustained economic growth in South Africa and to create permanent job opportunities for the growing population, large-scale investment in new undertakings and in the expansion of existing undertakings is necessary. It is here where the economic partnership between the public and the private sector must come into greater prominence.

In this regard the Government has already decided to approach this matter in two ways. Firstly, all capital expenditure by the public sector will be continually evaluated with a view to implementing on a priority basis, economically justified cuts. In this way the public sector’s claims on the capital market can be reduced so as to leave more room for investment by the private sector, with a view also to privatisation.

It must however be clearly stated that, after other possible obstructions have also been removed, the private sector will be expected to make use of this greater scope for investment. Long-term projects that will advance the economic development of all communities and underdeveloped regions and the country as a whole will have to be tackled. If these do not materialise the Government will be obliged to take up the slack and embark upon the task of development itself, to avoid a charge of standing idly by in the face of the underutilisation of scarce resources. In such a case critics would no longer be able to indict the Government for shackling private fixed investment through its own claims on the capital market.

The second leg of the Government’s approach involves the reduction of current spending in the public sector.

Public sector expenditure is like a fruit tree that keeps on growing and bearing more leaves. It would seem that what we have been able to do recently to trim the tree was merely to shake it until the leaves fell off. But leaves grow again. The tree must certainly be pruned so as to make it smaller, but it must be expertly pruned if its fruitbearing potential is not to be damaged. It must also be pruned continually, since unwanted leaves and offshoots are appearing all the time.

The Government is serious in its intention to optimalise its own expenditure programmes. With that in view the Government at the end of last year approved the appointment of a small, highly specialised task group to assist it in this matter. At the same time, the system of budgeting by objectives will be taken a step further. In close conjunction with the top management of Government departments, this task group will critically evaluate relevant aspects of current spending, in particular the various services that have been introduced over the years under the direction of the Executive Authority. This evaluation will employ various financial approaches and techniques such as zero base budget systems. The task group will moreover be on the lookout for opportunities to introduce user-charging, deregulation and even privatisation.

We have been exceptionally fortunate in acquiring the services of well-known professional and business leaders, as well as people from other appropriate disciplines. Their names will be announced once they have had the opportunity to orientate themselves with regard to this new type of assignment and to reconnoitre the ground. I should like to thank them for their willingness and enthusiasm to assist us in this way, and I look forward to working with them. I should also like to thank the Directors-General of the various departments in anticipation for their co-operation. There can be no doubt of the benefits for all the parties concerned that can emerge from constructive co-operation in this task.

2. ECONOMIC REVIEW

2.1 Domestic economic conditions

The South African economy is in the early stages of a new upward phase of the business cycle. This upswing began from a relatively low base in the fourth quarter of 1985, following a downswing from the middle of 1984 until the third quarter of 1985. The upswing is expected to gain momentum as the year progresses.

For 1985 as a whole, real gross domestic product showed a decline of about 1%, compared with an increase of 5% in 1984. But it began to rise moderately during the second half of 1985 and is expected to increase further by more than 3% in 1986.

Reacting to a combination of tight monetary and fiscal policies and natural economic forces, real gross domestic expenditure declined during five of the six quarters between the middle of 1984 and the end of 1985. Following a rise of 7½% in 1984 it declined by a similar magnitude in 1985.

A welcome development in 1985 was an increase in the ratio of gross domestic saving to gross domestic product, from 23% in 1984 to 26½% in 1985. Personal saving made a significant contribution to this increase, rising from 3½% to 6% of personal disposable income. I shall return to this welcome development and how it may be reinforced.

Unemployment increased substantially in 1985, but is expected to decline in 1986. The increase in nominal salaries and wages per employee slowed down from 16,4% in 1984 to 11,1% in 1985. After allowing for inflation, real remuneration per employee increased by 4,2% in 1984, but then declined by 4,4% in 1985.

2.2 Balance of payments and the rand

The balance of payments on current account registered a substantial surplus of R7,1 billion in 1985. This was equal to 6% of gross domestic product—an exceptionally high ratio by any standard. Moreover, the surplus increased progressively during the course of the year and reached an annualised rate of R11,9 billion during the fourth quarter of 1985.

Exports (excluding gold) increased in 1985 by 58% in rand value terms and by 22% in volume terms, while the rand value of the net gold output increased by 32%. Imports, on the other hand, increased by only 6% in rand value terms and declined by 16% in volume terms.

This improvement in the current account was mainly the result of two developments. The first was the elimination of excess demand by means of restrictive fiscal and monetary policies. The second was the depreciation of the exchange rate of the rand, which discouraged imports and encouraged exports.

If, as expected, the domestic economic upswing gains momentum in the months ahead, imports are likely to rise, so that some reduction in the current account surplus during the course of 1986 is likely. Present indications are, however, that there will still be a current account surplus of between R4 billion and R5 billion in 1986.

On capital account there was a large net outflow of R10,4 billion during 1985 as a whole. Primarily this took the form of shortterm capital movements, including leads and lags in foreign payments and receipts. The outflow became exceptionally large in the third quarter of 1985 as certain foreign banks began to withdraw credits previously extended to South African banks and other enterprises. This induced the authorities to declare a debt standstill, to which I shall return shortly, and to reintroduce exchange control over non-residents in the form of the financial rand system.

These steps were unavoidable and initially had some counterproductive effects. For example, certain South African debentures or notes issued abroad that might otherwise have been rolled over, had to be repaid. In addition, as foreign credits for imports became difficult to obtain, many importers had to make cash payments “up front”. The general expectation that, in these circumstances, the rand would depreciate produced unfavourable leads and lags in payments. The result was that a net capital outflow of R3 billion during the third quarter of 1985 was followed by an even larger net outflow of R5 billion during the fourth quarter.

The outflow of capital more than neutralised the large current account surplus and exerted downward pressure on the exchange rate of the rand. After remaining relatively stable around 50 US cents between January and July 1985, the rand declined sharply in August to below 36 US cents and thereafter fluctuated between 36 and 38 US cents for most of the period up to 18 December 1985. From that date the rand again started to appreciate.

Various favourable developments since December contributed to the improvement in the exchange rate. Firstly, the unfavourable leads and lags started to diminish. Secondly, the new measures introduced during December 1985 to increase the Reserve Bank’s ability to influence the exchange rate, changed expectations in the foreign exchange markets. Furthermore the dollar price of gold began to rise and the agricultural outlook improved as a result of good rains in many parts of the country. The State President’s Address at the opening of Parliament on 31 January 1986 contributed further to an improvement in overseas perceptions of South Africa’s socio-political and economic prospects. Finally, the agreement reached on 20 February 1986 in London between South Africa and its 34 largest creditor banks on the handling of the foreign debt improved market sentiment. The net effect was a reversal of the leads and lags and, together with the prevailing current account surplus, this improvement on the capital account resulted in a marked appreciation of the rand. For example, between 18 December 1985 and 14 March 1986, the rand appreciated by 29,9% on average against other currencies and 36,1% against the US dollar.

2.3 The foreign debt standstill arrangements

South Africa and all its people have paid a stiff price for the far-reaching but necessary economic adjustments of the past year. As already indicated, the gross domestic product has fallen, unemployment has risen sharply, and average real wages and salaries have fallen. In the process many South African undertakings have been badly hit, and many smaller businesses were liquidated under the pressure of the deteriorating economic conditions.

It is regrettable that, precisely under these circumstances of painful downward adjustment, certain foreign banks saw fit to insist on speedier repayment of their short-term loans to our banking sector. Nor could South Africa turn to the IMF for assistance at that stage. Although it is the function of that body to help its members that are experiencing balance of payments difficulties, the restrictive conditions imposed by the United States Congress on IMF loans to South Africa, coupled with political pressure exerted by other governments on the Executive Board of the Fund, made it difficult for South Africa to seek help from this quarter. We are in fact currently engaged in making regular repayments on the loans we obtained from the IMF in 1982.

From the available balance of payments data it appears that during the seven quarters from the beginning of 1984 to the third quarter of 1985, when the debt crisis developed, South Africa repaid more than R8 billion of short-term foreign debt. Unfortunately, in the process the Reserve Bank did not have the opportunity of rebuilding its foreign reserves. When foreign creditors then made further demands for repayment there was no choice but unilaterally to declare a temporary standstill in the repayment of certain foreign debt on 1 September 1985.

In view of the large surplus existing at that stage on the current account of the balance of payments it was possible for South Africa in those difficult circumstances to leave about 40% of its foreign debt commitments outside the restricted payments net, and also to continue to pay in full all interest on the foreign debt. South Africa’s foreign debt problem certainly did not arise from any so-called “bankruptcy”, but rather from a temporary liquidity problem.

After difficult negotiations South Africa managed recently to come to an understanding with its largest creditors on the future treatment of the foreign debt. As is known, this entails the release during the next 12 months of 5% of the restricted debt, with further negotiations with the same group of banking institutions in February 1987 on the future handling of the debt situation. Meanwhile, all other creditor banks have been asked to fall in with this arrangement.

South Africa is greatly indebted to Dr Fritz Leutwiler for his role in these negotiations. I therefore take this opportunity to thank him warmly on behalf of the Government for his readiness to act on our request and that of our principal creditors as an independent mediator in these delicate negotiations.

We are not underestimating the formidable problem of South Africa’s re-entry on a large scale to the international money and capital markets, in particular we realise that the present situation calls for even more financial discipline from us all. We shall only be able to persuade the international bankers to return to South Africa as investors if we can convince them that we actually do not “need” them any more. To that end there must be a tight rein on our spending programs and our domestic savings must be sufficient to finance our development projects, as was often the case in recent years. This great task forms part of the objectives of the Budget I submit to you today.

2.4 Retrospect of the short-term strategy of 1985-86

In last year’s Budget Speech the nature and objectives of the official monetary and fiscal strategy for the ensuing year were set out in some detail. In doing so, emphasis was placed on the need to improve the “mix” of monetary and fiscal policy by laying more stress on the fiscal ingredient. It is gratifying to be able to report today that considerable progress has been made in the application of this strategy.

The first objective of the strategy was to eliminate excess demand or overspending, and the second was to transform the deficit on the current account of the balance of payments into a surplus. Both these objectives have been fully attained, and also sooner than was envisaged.

The contribution made by fiscal policy to this satisfactory outcome will be evident from the detailed figures I shall present today.

The contribution made by monetary policy is well illustrated by the extent to which the growth of the money supply was curbed during 1985. Measured over a period of twelve months, the growth rate of the broad money supply, M3, decelerated from a peak of 24,1% in November 1984 to 10,3% in January 1986.

As to interest rates, the Reserve Bank has since the beginning of May 1985 reduced its bank rate in nine stages from 21,75% to its present level of 12%. This has helped to bring down the commercial banks’ prime overdraft rate from 25% to 15,5%.

That these interest rate declines have so far proved fully reconcilable with effective money supply control is evident from the monetary statistics to which I have already referred. Even so, the Reserve Bank’s decision to let interest rates fall to the extent they did was not taken lightly. Full consideration was given to the existence during most of this period of a net capital outflow, a debt standstill, a relatively weak exchange rate and a high rate of inflation. The official assessment was that this state of affairs was not the result of excess demand; indeed, the latter had been eliminated by the middle of 1985.

By September 1985 it had, however, become apparent that increasing levels of unemployment in all communities called for urgent action. It was therefore decided to stimulate the economy moderately, inter alia through increased government expenditure. This shift of emphasis in policy allowed progress to be made towards another important objective, namely a higher real rate of economic growth. As previously indicated, the upswing has begun and the real growth rate is rising.

A fourth policy objective was to reduce the rate of inflation. As was emphasised at the time, this could only be expected to occur after the inflation rate had first increased further. Such an acceleration was inevitable because the depreciation of the rand against other currencies during the period from September 1983 until January 1985 has not yet exerted its full upward effect on domestic costs and prices. It was nevertheless hoped that the rate of increase of the consumer price index would peak before the end of 1985 and then begin to decline.

However, the new depreciation of the rand since the third quarter of 1985 represented a setback in the fight against inflation. Unlike most exchange rate depreciations, this particular one was not caused by excess money creation, unduly low interest rates or an inordinately large budget deficit. This depreciation was caused by an outflow of capital that occurred for totally separate reasons. In such abnormal circumstance the maintenance of interest rates at their peak levels of early 1985 would have contributed little to removing the underlying causes of the exchange rate depreciation and inflation, and would merely have delayed the domestic economic recovery.

This depreciation raised import prices in terms of rands and thereby exerted new upward pressure on the domestic price level. The end result was that, measured over a twelve-month period, the rate of increase of the consumer price index accelerated from 10% in February 1984 to 20,7% in January 1986.

In retrospect, therefore, it is evident that, apart from the serious setback suffered on the inflation front, the short-term strategy outlined in last year’s Budget Speech has, in fact, been implemented and has achieved the intended results. Excess demand has been eliminated, a larger than envisaged surplus on the current account of the balance of payments has been achieved, and the domestic downswing has been transformed into the initial phase of a new upswing.

†3. FISCAL AND MONETARY STRATEGY FOR 1986-87

3.1 Policy implications

I turn now to a broad outline of the Government’s short-term economic strategy for the year ahead. The precise budget figures that form a basic part of this strategy will be provided later in this address.

As the events of the past year unfolded and, in particular, as progress was made in reducing excess demand, the stance of both monetary and fiscal policy became progressively less restrictive. Although the economy is in the early phase of a new upswing, it is growing from a low base and is still characterised by relatively low activity, surplus capacity, unemployment and declining real fixed investment.

The present, more growth-oriented stance of monetary and fiscal policy does not in any way imply a weakening of the official resolve to curb inflation. It is, however, probable that the rate of inflation will remain high in the months ahead. However, now that the rand has not only ceased to depreciate but has, in fact, appreciated strongly against other currencies, the inflationary effects of the earlier depreciation should begin to diminish before too long.

The present short-term monetary and fiscal strategy can be described as moderately expansionary. It is a policy of encouraging investment and consumer spending in order to ensure that the new upswing gains enough momentum to produce a growth rate of 3% or more in real gross domestic product in 1986, with the attendant increases in income, output, employment and general economic activity. At the same time, however, it is designed to prevent the re-emergence of excess demand or overspending. The achievement of this objective is important, not only to avoid new demand inflation but also to ensure that another large surplus is achieved in 1986 on the current account of the balance of payments, as part and parcel of our strategy for dealing with the foreign debt situation.

A new element in this strategy is the setting of targets for the money supply, in line with recommendations in the report of the De Kock Commission, to which I shall now briefly refer.

3.2 The Commission of Inquiry into Monetary Policy

The Final Report of the Commission of Inquiry into the Monetary System and Monetary Policy in South Africa was submitted to the Government in June 1985. At the Government’s request, the Commission had earlier brought out two interim reports, one on exchange rates in November 1978 and one on building societies in November 1982. The main recommendations of both these interim reports were accepted by the Government and have in most cases already been implemented. New building society legislation incorporating the principles propounded by the Commission is at present before Parliament.

The Final Report is unanimous and contains some 200 recommendations and findings regarding the South African monetary system and monetary policy. Many of the Report’s detailed recommendations have already been accepted and implemented. These include: measures to improve the functioning of the various financial markets; the promotion of the role of discount houses in the money market and the replacement of the National Finance Corporation by the Corporation for Public Deposits; and amendments to the Banks Act to provide, among other things, for the abolition of statutory distinctions between “commercial”, “merchant” and “general” banks, new asset-based capital and reserve fund requirements for banks, and the extension of these requirements to the overseas business conducted by the banks’ foreign branches and subsidiaries.

I am pleased to announce today that the Government has accepted another main recommendation of the Commission, namely the proposal that the Reserve Bank should, with the approval of the Government, set specific target rates of growth for one or more of the money supply aggregates. Since the money supply, interest rates and exchange rates are interdependent, this naturally means that independent targets cannot also be set for interest rates or exchange rates. As recommended by the Commission, however, the official money supply target will be “low profile” and flexible. This means that there will be no rigid and overriding “money rule”, which would imply leaving interest and exchange rates completely free to find their own levels at all times. Within the broad constraints imposed by the money supply target, the monetary authorities will, as in the past, be able to exercise some discretionary judgment in respect of their interest and exchange rate policies.

A major reason why it has been decided to introduce formal monetary targetting is to demonstrate that the monetary authorities are determined to prevent a recurrence of what they themselves have consistently identified as a vital element in the process of inflation, namely too rapid a rate of growth of the money supply. In addition, the targetsetting should provide interested parties with greater certainty regarding the likely stance and direction of monetary policy.

This being our first attempt at setting a money target, we shall obviously have to tread carefully. We are fully confident that the built-in discipline of money supply targeting will contribute to a more effective financial policy in South Africa.

The details of the targets and targeting procedures laid down for 1986 are set out more fully in a separate statement that is being issued today by the Reserve Bank.

The Government would like to express its special thanks to Dr Gerhard de Kock, his fellow commissioners and their associates for the precedent-setting task they have pursued with great dedication. Their findings and recommendations represent the best available expertise and authority on monetary policy. The fact that their recommendations were cleared with the respective business sectors renders the report exceptionally useful, and the Government’s reaction on the few outstanding subjects will be announced as soon as possible.

3.3 Control of expenditure

In last year’s Budget Speech it was announced that government departments would be requested to supply the Department of Finance with projections of their expected monthly drawings for the full financial year. These figures would serve, firstly, as an early warning system for the Treasury of over-spending by departments; secondly, as a discipline for each department to keep its expenditure within the budgeted amount; and, thirdly, as a basis for the determination of the monthly Exchequer deficit and the scheduling of the State’s financing and borrowing program.

Experience gained during the past year has shown both the benefits and the drawbacks of this system. The co-operation of departments has meant that the new approach has nonetheless helped us significantly in our attempts to restrict the increase in State expenditure to really essential extensions and/or specific expenditure programs. The system will therefore be streamlined and continued in the coming financial year.

Since subsequent years pay the price for the sins of previous years, or may benefit therefrom, I now turn to the:

4. 1985-86 FINANCIAL YEAR

4.1 Revenue

The revised estimate of total revenue for the 1985-86 financial year is R29,730 billion, which represents an increase of 26,9% above the 1984-85 collections and 5% above the printed budget estimate. Tax collections by Inland Revenue are estimated at R27,620 billion, which is R1,307 billion more than the original estimate of R26,313 billion, while it is expected that Customs and Excise will yield R2,110 billion, or R101 million above the printed budget estimate of R2,009 billion.

The increase in Inland Revenue can be attributed virtually exclusively to tax payments by the broad corporative sector. Gold mines are expected to contribute R3,055 billion to the Exchequer this year in the form of income tax and gold mining leases, as compared with the original estimate of R2,441 billion. This increase arises from the unforeseen sharp depreciation in the rand, which raised the gold price in rand terms from an average of R605 per fine ounce for March 1985 to R863 for December—the average for 1985 was R711 against R527 for 1984. This depreciation of the rand also raised the export earnings of other mines, and it is expected that income tax payments by nongold mines will be R421 million, which is R137 million higher than the original estimate.

At this stage it is expected that the budgeted amount for income tax from non-mining companies will be exceeded by about 21,2% to reach R5,150 billion. This deviation stems chiefly from an accelerated cash flow consequent upon the introduction of a third provisional tax payment by companies, higher than expected revenue from the reduction of certain allowances, and intensified audit inspections by Inland Revenue.

The economic recession and the low level of gross domestic expenditure had their impact on tax revenue: the net revenue from general sales tax will probably be R8,110 billion as against the R8,3 billion of the original estimate. A similar decline can also be seen in excise collections, where the sum expected is R1,820 billion as against the budget estimate of R1,889 billion. An appreciable fall in import volumes has meant that customs duty collections for 1985-86 are now estimated at R1,210 billion, R380 million lower than the budgeted amount. On the other hand, the surcharge on imports that was introduced in September 1985 is estimated to yield R510 million. The gross income from Customs and Excise has thus risen to R3,630 billion from the budgeted figure of R3,559 billion.

Payments to South Africa’s Customs Union partners amounted to R1,220 billion, slightly less than the R1,3 billion budgeted, while it was decided during the financial year to increase the transfer to South West Africa to R300 million, as against the budgeted R250 million—a figure that had remained unchanged since 1982-83.

4.2 Expenditure

The estimated actual expenditure for the 1985-86 financial year amounts to R32,977 billion as against the R31,460 billion of the main Budget, representing an increase of 21,6% on final expenditure for 1984-85. Particulars of the increased expenditure of R1,517 billion have already been given in the Second Reading speech on the Additional Appropriation for 1985-86, but for the sake of perspective they will be briefly dealt with again.

4.2.1 Job creation

Of the R600 million earmarked for this purpose, R530 million will have been spent during 1985-86 on job creation, food aid, the training of unemployed persons and the financing of bodies such as the Small Business Development Corporation and the Development Bank of Southern Africa, as well as on the Unemployment Insurance Fund. The allocation of the remaining R70 million will be addressed in the supplementary expenditure proposals.

Up to the end of February 1986 some 460 000 people had been accommodated for various periods in the job creation projects, a figure that should rise to about half a million by the end of March 1986. At the end of February there were 276 000 people at work under the umbrella of the many projects, and the man-days worked were 20 million. The small business sector maintained or created work for 14 000 people. In addition to this, direct relief in the form of food was provided for some one million people.

A particularly successful aspect of the job creation project has been the training program. This has not only brought immediate relief but has also equipped the trainees to fend for themselves. By 31 March 1986 some 264 000 people will have received training preparing them better to obtain work. I am glad to say that there has been an upsurge of positive reaction to this operation: a large volume of letters has come from the former trainees, testifying to the skills they have acquired and to the better position in which this has placed them.

4.2.2 Statutory payments

These payments increased by over R654 million, chiefly by virtue of the servicing of the public debt. The most important reason for this was the exceptionally low exchange rate maintained by the rand for a significant portion of the year. Moreover, during 1985-86 the Exchequer, in the process of sound monetary policy implementation, drew larger amounts from the market, and at an earlier stage than was anticipated at the time when the Budget was compiled. Interest rates were also on average higher during the year than allowed for in the Budget.

4.2.3 Other deviations

The purposeful spending on job creation and training projects and the additional cost of the public debt, were the main items in the additional expenditure. Other important additions to the 1985-86 main Budget arose from security services (R288 million), local authority development (R94 million), provincial subsidies (R103 million), exchange rate losses (R60 million) and housing aid for the Black population (R100 million).

4.2.4 Savings on personnel-related expenditure

In the Budget speech last year I alluded to mandatory savings of R500 million on personnel-related expenditure, of which R417 million would emerge from suspensions to be effected by the Treasury in the voted amounts. The Government was however unable to see its way clear to enforcing such cuts for certain key groups such as teachers and nursing personnel, or for low-paid labourers, who have been relatively hard hit by economic conditions. Despite this it was possible, by the freezing of certain posts and the abolition of others, as well as through measures aimed at higher productivity to save R352 million of the planned R417 million.

4.3 Financing of the 1985-86 deficit

As already indicated, expenditure and revenue amount to R32,977 billion and R29,730 billion respectively, giving a deficit before borrowing of R3,247 billion for 1985-86. This is 2,6% of the estimated gross domestic product and is comfortably below the 3% guideline laid down in last year’s Budget Speech as the maximum for the deficit before borrowing. Furthermore, capital expenditure for 1985-86 is estimated at R3,2 billion: this is equal to the deficit before borrowing, meaning that the goal that loan funds should not be used for current expenditure, has been reached.

Loan redemptions rise from R1,695 billion to R2,505 billion, largely by reason of appreciable increases in the redemption of foreign loans and of Treasury bills.

The financing requirement for the present financial year is thus R5,752 billion, or 23,3% above the figure envisaged in the Budget (after supplementary expenditure). The State’s financing program was, however, once again highly successful, yielding R6,075 billion. The Public Investment Commissioners are expected to contribute R3 billion, which is 20% above the original estimate, while the sale Of government stock has risen by over 50% to R2,373 billion. This amount came virtually exclusively from the non-bank private sector—a fact that emphasises the success of Exchequer financing. If the usual assumption is made regarding the full reinvestment of maturing stock, it is evident that the sale of new government stock, which forms an integral part of the State’s monetary policy implementation, amounted to more than double the budgeted sum. This placed a heavier interest burden on the Exchequer. The debt standstill naturally meant that the amount that could be raised under foreign loans was smaller than had been expected.

The net outcome of this financing activity is that there may be a surplus of R323 million for 1985-86. It is considered advisable to transfer this amount in full to the Special Defence Account.

5. 1986-87 FINANCIAL YEAR

5.1 Revenue

As is customary, the printed estimates of revenue to be tabled today reflects the present basis of taxation—that is, no account is taken of the tax proposals in this speech. The estimated revenue for the 1986-87 financial year is R34,430 billion, or an increase of 15,8% above the revised estimate of R29,730 billion for 1985-86. Inland Revenue’s contribution is expected to increase by 15,4% to R31,880 billion, while net income from Customs and Excise is estimated at R2,550 billion, an increase of 20,9%.

Inland Revenue’s revenue from gold mines is expected to fall by 7,7% to R2,820 billion, against the revised figure of R3,055 billion for 1985-86. This can be attributed to an expected improvement in the average exchange rate of the rand in 1986, a rising cost structure, and continuing relatively high capital expensing by gold mines. In contrast to this decline, a rise of 10,7% is expected in income tax payments by non-mining companies. In consequence of the further phasing-in of the taxation of fringe benefits and the additional revenue expected from this source, improved economic conditions, expected salary adjustments and the accompanying fiscal drag, an increase of 33,8% in net individual income tax to R11,4 billion is expected. This amount does not include the abolition of the 7% surcharge on individuals: this concession, which will be discussed later, is expected to amount to R500 million. The expected increase of 16,2% in net revenue from general sales tax is also chiefly attributable to the expected economic improvement in 1986.

The expected moderate economic revival, coupled with the firming of the rand, should mean that imports will gradually increase. As a result, a moderate increase of 7,4% in customs collections to the level of R1,3 billion is envisaged, while a further R970 million is expected from the 10% surcharge on imports. Transfer payments under the Customs Union Agreements are estimated at R1,320 billion, and it has been decided that the transfer payment to South West Africa be increased by a further R50 million to R350 million. Taking these into account, net income from Customs and Excise is estimated at R2,550 billion.

5.2 Tax Matters

5.2.1 The Margo Commission

Wide interest is focused on the activities of the commission of Enquiry into the Tax Structure of the Republic of South Africa, under the chairmanship of Mr Justice Margo, and in the light of the present socioeconomic circumstances in South Africa it is manifest that the appointment of this commission was both needful and timely. It is imperative that South Africa have a tax structure that, with due regard to the universal norms for a good tax system, is capable of contributing significantly to the long-term socioeconomic development of the South African community.

The commission has a wide-ranging brief that confronts it with exceptional demands. From the contract that I have from time to time with the chairman, I am aware of the commission’s deep realisation of the weighty responsibility resting on its shoulders. The commission has not hesitated to garner opinions—mostly divergent—over a wide area and from all interested parties; and I am therefore confident that when the final report is submitted later this year, the Government will have the benefit of findings and recommendations that can be fully justified in the light of the realities of the South Africa of the 1980s.

Bearing in mind the commission’s wide brief, it would not be reasonable to expect unanimity on so controversial and emotive a matter as taxation.

Now that the commission is in the home stretch I should like to take this opportunity to thank the chairman and the commissioners for their dedicated work over the past 15 months, and to wish them the wisdom of Solomon in the formulation of their final proposals.

In the light of the advanced stage that the investigation has reached it would not be desirable to introduce far-reaching changes in the tax structure now, and I have thus sought as far as possible not to disturb the status quo with respect to that structure. Ad hoc changes in one area can obviously hinder adjustments in other areas and mean that the objectives set by the commission are ultimately not achievable.

5.2.2 General sales tax, excise duty and surcharge on mines

It is therefore undesirable, despite the several requests for further exemptions from general sales tax, and particularly food items, to alter the present GST structure or rate. Moreover, any increase in excise duties at present could be counter-productive, since it could in fact—on account of the potentially adverse effect on consumption—lead to a reduction in total revenue from this source.

It is also fitting that the status quo of the past year be maintained with regard to mining companies. The profits of these companies have, generally speaking, not been badly hit by the unfavourable domestic economic climate of the past year. Indeed, the profits of exporters, including mines, have risen as a result of the fall in the value of the rand. Other companies and individuals are, however, still experiencing cash flow problems. I propose therefore that the 25% surcharge on gold and diamond mines and the 15% surcharge on other mining companies again be imposed in respect of financial years ending between 1 April 1986 and 31 March 1987.

As to non-mining companies it is proposed that the tax rate remain unchanged at 50%.

We live in rapidly changing times, and policy, including tax policy, must take account of this. Moreover, the first opportunity the Government will have of implementing any of the Margo Commission’s recommendations will be during the 1987 session of Parliament. It is therefore appropriate to announce certain tax adjustments today, without in any way anticipating the Margo Commission’s findings. The proposals are purely practical measures to address urgent problems or remedy existing anomalies.

5.2.3 Provisional tax: companies and individuals

The Pay-As-You-Earn system of tax collection (PAYE) was originally designed to ensure that a taxpayer’s liability was met chiefly during the tax year concerned. In conjunction with this, and for purposes of the provisional tax payable, estimates of taxable income are required from companies and individuals who receive business income or income from investments.

Over the years various adjustments have been made to the system to meet certain problems and changed circumstances. The most recent change was in October 1985, when it was announced that persons older than 65 would in future be exempted from rendering provisional returns, provided their taxable income did not exceed R20 000 for the relative year of assessment and came only from investment income, salary and pension. This does not mean of course, that they are now exempt from income tax.

It is reasonable to expect taxpayers to make proper provision for the payment of tax shortly after the end of the tax year. It is also desirable that the same rules should apply to all taxpayers, including individuals in the higher income group. It is therefore proposed that:

1. (a) The total of the first, second and third payments of provisional tax by companies be increased from 90% to 100% of their actual tax liability, with the proviso that if the payments amount to more than the full liability, interest on the surplus will be paid by the State at the prescribed rate. This applies to years of assessment ending on or after 28 February 1986; and
2. (b) provisional taxpayers (other than companies) whose taxable income exceeds R50 000, also be liable for the third payment of provisional tax. As this will be in respect of years of assessment ending on or after 28 February 1987, the first additional payment will be due in August 1987.

The proposed measures do not affect the total or final liability for taxation: they are merely a method to ensure that the full tax account is settled earlier.

These earlier payments by companies should give the Treasury an advanced cash flow of R291 million in 1986-87. The proceeds from individuals will first appear in the 1987-88 financial year.

5.2.4 Stamp duty and marketable securities tax

I propose that with effect from 1 April 1986 the stamp duties relating to the transfer of marketable securities be raised from 10 cents to 15 cents per R10 or portion of the relevant consideration or value. At the same time the rate of the marketable securities tax will be raised in conformity from 1% to 1,5%. The additional revenue is estimated at respectively R20 million and R25 million for 1986-87.

I further propose that the levy on debit entries be raised on 1 July 1986 from 5 cents to 10 cents per entry, which should result in R15 million additional revenue for 1986-87. Further details appear in the tax proposals to be tabled today.

Experience has shown that these particular taxes have no noticeable influence on the nature and magnitude of financial transactions. The present tendencies in these areas, as compared with real activity elsewhere in the economy, are such that these increases in stamp duty and marketable securities tax are neither inappropriate nor unwarranted.

5.2.5 Import surcharge

To generate revenue from which the special package for both unemployment relief and special training projects could be financed, a surcharge of 10% on certain imports was introduced on 23 September 1985. This tax also has the advantage of serving to discourage imports. In view of the fact that the rand has appreciated considerably since the surcharge was imposed—thereby lowering the cost of imports—and since we should by virtue of debt repayment be prudent with our foreign exchange reserves, there is now even more reason to retain the surcharge as a possible import disincentive. Moreover, the need for revenue remains.

It is necessary that the tax base be kept as broad as possible. The surcharge on the importation of books, coupled with the still relatively low exchange rate of the rand, does, however, create a special problem for educational institutions and libraries. I believe a concession is justified in this case, and I therefore propose that the surcharge on books be abolished. This will involve a loss of revenue in 1986-87 of R10 million.

This concession will not be able to serve as a precedent in the treatment of future requests for tax exemptions. The Government is in this way contributing towards the lower cost of books, and it calls on importers and booksellers to pass the reduction on to the buyer in full. It also looks to those who have so earnestly pleaded this matter to ensure that the reduction does, in fact, eventuate.

5.2.6 Customs duty on fully assembled imported motor cars

In last year’s Budget the customs duty on fully assembled imported motor cars was raised from 100% to 125%. However, the subsequent sharp depreciation of the rand magnified the price-raising impact of this measure. The decline in import volumes caused revenue from this source to fall sharply instead of rising. This particular market, with its allied service and maintenance industries, has come to a virtual standstill.

Although there is certainly no intention of encouraging imports in general, it is proposed in the circumstances that this duty revert to 100%, which still gives the local industry more than sufficient protection. No loss of revenue is expected.

Government notices to implement the reduction in customs duty on motor cars and the abolition of the surcharge on books will be published tomorrow. This reduction and abolition will apply to goods that have not yet been cleared for domestic use.

5.2.7 Regional levies

There is still some uncertainty regarding the implementation date and the precise basis and level of the levies imposed by the regional services councils. Since the business community in particular needs to plan ahead, it is appropriate to make a few brief remarks on the subject.

The regulations governing the regional services levies and regional establishment levies are now in the final stage of preparation and will shortly appear in the Gazette for general information. These rules, which prescribe the basis of taxation and the collection system, will apply uniformly to all regional services councils throughout the country.

The rate of the levy, however, may differ among the regions. Furthermore, regions will be able to apply differentiated tariffs on certain categories of those subject to the levies. The Council for the Co-ordination of Local Authority Matters and the Minister of Finance recently concurred that, where regional levies are introduced during the coming financial year, the regional establishment levy should not exceed 0,1% of a business’s turnover, while the regional services levy will be limited to a maximum of 0,25% of its total payroll.

As to the date on which these levies take effect, it should be remembered that a regional services council must first formally decide to introduce the levies. It is therefore judged necessary that, by virtue of, inter alia, considerations of equity, administrative requirements and registration procedures, a notice period of three months will be needed before the collection can begin.

Since the Delimitation Board will naturally have to fix the boundaries of a regional services council area before the council concerned can be constituted, it is clear that decisions to introduce levies will not be forthcoming in the immediate future, as both these processes will necessarily take some time. It is thus unlikely that levies will be widely collected before September 1986.

5.2.8 Tax collections and training

During the past year the Directorate: Inland Revenue continued with its intensified collection and audit procedures, with results beyond all expectations. On the income tax front 2,3 million tax returns were audited during the two years ended 30 September 1985 and additional income of R1,16 billion was subjected to tax. During the 17 months to 28 February 1986 the inspection teams assessed some R138 million in additional sales tax and penalties.

More than 3 000 responses were received to the tax amnesty which was announced in last year’s Budget Speech and which expired on 31 August 1985. The additional revenue collected was some R10 million.

With a view to increasing efficiency still further the Directorate: Inland Revenue provides in-house training. In the 1985 calendar year more than 2 000 officials attended courses in income tax, sales tax and other taxes. About one-third of all Inland Revenue officials were thus involved in 1985 in some kind of formal training. It is gratifying that this investment in the future has already begun to bear fruit.

The authorities do not expect any taxpayer to pay more than he owes. Indeed, the Government itself helps him to reduce his tax liability, for instance by granting tax concessions on certain savings accounts and on life assurance policies.

Tax evasion, on the other hand, is a criminal offence. The person failing to disclose income, or employing other practices to evade tax, does his honest fellow taxpayers an injustice, since he helps to raise tax rates to a level higher than they would be if everyone made the proper contribution.

This Budget reflects once again the great magnitude of the services in which everybody shares. It is only right that everyone should contribute to the financing of these services according to their ability.

So it is no great feat or victory over the Government of the day or the Receiver of Revenue to evade taxation—simply dishonesty and a crime!

*5.3 Expenditure

The printed Estimate of Expenditure (RP 2) for 1986-87 to be tabled today amounts to R37,447 billion. This represents an increase of 19% on the 1985-86 Budget and 13,6% on the revised figure of R32,977 billion.

5.3.1 Constitutional dispensation

The attention of hon members is drawn to the fact that, on account of technical differences in the treatment of the transfers to the accounts for own affairs, the total appropriation for 1986-87 cannot be compared with that for the previous year. In 1985-86 the main component in these transfers was statutory provisions under a formula prescribed in the Revenue Accounts Financing Act, 1984. That Act was merely an interim measure for 1985-86, to be replaced in due course by a general law containing multi-year functional/normative formulas. It is a complex matter and, while the Department of Finance has already made much headway in the negotiations on their determination, finality has not yet been reached between the department and the several own affairs administrations. Once these formulas have been finalised, a general law will be formulated and laid before Parliament in the usual way. Until then the transfers to the own affairs budget accounts must take the form of appropriations. These large shifts explain why a year-on-year comparison of total statutory provisions or appropriations is largely meaningless.

5.3.2 Public service remuneration

The announced 10% increase in salaries is estimated to cost R1 billion. Public servants have enjoyed no general salary adjustment over the past 27 months; in fact, with the reduction in the service bonus last year, their nominal income fell. The proposed adjustment reduces the backlog to an extent and simultaneously aims to ensure that the State’s salary structure as a whole does not fall unacceptably behind that of the private sector.

A further amount of R227 million is being made available so as to continue on a modest scale the program of job differentiation, which seeks to ensure that the State is able to retain the services of staff in key categories.

While it is accepted that in any large organisation, in the private sector too, there is always room for savings and for rationalisation of services, it is appropriate to make a few remarks on a charge that is frequently heard, namely that the public service is too big and too unwieldy and is growing too fast, on top of which officials are overpaid.

State and provincial officials are found chiefly in those functions involving regulation, security and development. The relationship between these functions is broadly as follows: regulation and administration (the archetypal “bureaucracy”), 10%; security (for example defence, police), 20%; and development (for example education, research and nursing), 70%.

Whereas the growth in employment in the public service over the 21 months to March 1985 was in total 1,6%, the growth in education personnel was 9,2%. The rate of growth in Black education was 14,1%, and in Coloured and Indian education was also relatively high at 9,5% and 6,4% respectively.

These figures surely make it clear that the number of people involved in regulatory and administrative functions is not unduly high and that the growth in numbers is to be found in those functions that render an indispensable development service to the community. Indeed, consequent upon the Government’s initiatives on savings on staff expenditures and on productivity improvement, the number of posts in the Public Service at the end of 1985 was 1,1% less than at the end of 1984, while 47,7% of all vacant posts were abolished on 1 April 1985.

An analysis of the notch distribution in payroll statistics shows that 71% of state employees earned less than R10 000 per annum in 1985 and 94% under R20 000. The labelling of officials as over-paid is therefore both misleading and unfair.

If these things are taken into account, the deal for public servants will surely be seen from a better perspective.

The Government would like to take this opportunity to place on record its thanks to all State employee for their services and their special efforts to cut expenditure. Their personal sacrifices in this regard are greatly appreciated.

5.3.3 Housing

This is an own affair and will consequently be discussed in the respective Houses. In the estimate of expenditure provision is made for expenditure of R650,6 million on housing, which is an increase of 25,4% on the 1985-86 main Budget figure. The net addition to the capital of the National Housing Fund for all population groups in 1986-87 is R239 million, 28% higher than the comparable figure for 1985-86.

Included in this figure is an amount of R65,6 million for Blacks—a general affair— representing an increase of 27,4% on the 1985-86 figure. This amount, as well as a further sum of R72,7 million in respect of the return flow of interest and capital from loans will be used to their benefit by being added to the capital of the National Housing Fund. In addition to this R173 million is provided under the vote Development Aid. The total provision for Black housing is thus R311,3 million.

5.3.4 Education

Just as in the case of housing, education (except Black education) is an own affair.

The importance of this function warrants, however, a few comments. Hon members will notice that educational expenditures still form by far the largest expenditure item on the Budget, and the R6,082 billion proposal for 1986-87 represents an increase of 19,3% above the budgeted figure for 1985-86.

Regarding Black education as such, the increase in primary and secondary education outlays is R159 million, or 27,8% above the budgeted amount for 1985-86. It includes higher expenditure on personnel, the erection of new schools and classrooms to cater for the normal growth in pupil numbers, free provision of stationery and books to pupils, and an increase in the building program to reduce backlogs.

5.3.5 Defence

As has frequently been stressed in the past, South Africa must be fully prepared in the military sphere in order to contain the forces threatening the country. Although sporadic and limited, the onslaught both internally and on our borders demands the deployment of large numbers of troops and great quantities of equipment. Continual stocking-up and the methodical replacement of major equipment naturally means heavy financial demands. An amount of R5,123 billion on this Vote is therefore now proposed, which represents 13,7% of the estimated expenditure for 1986-87. This ratio is virtually the same as that for the previous financial year.

5.3.6 Atomic Energy Corporation (AEC)

A sum of R775,8 million is provided for the Atomic Energy Corporation, or an increase of 47,5% over 1985-86. This increase arises chiefly from the fact that the process is being continued of bringing back onto the Budget services previously financed by loans in the open market. If the carry-over costs of expenditures that in 1985-86 were covered by loans of about R157 million, and the redemption in 1986 of AEC loans of R52,5 million, are left out of account the increase for this service is only 7,6%.

5.3.7 Transfer of technology

The development and transfer of technology is closely bound up with industrial development. In the Kleu Report on an industrial strategy for South Africa the need is identified for a co-ordinated marketing strategy to make industrialists more aware of improved technology. This is done by exposing them to the available technology, and by allowing own or applied technology to develop locally. Thus can the efficiency of South African industry be improved and its competitiveness, domestic and international alike, be assured.

This marketing strategy can best be accomplished and co-ordinated by State initiatives. The Government has therefore, as part of its industrial development strategy, taken steps to provide a suitable mechanism to promote the development and transfer of technology, and has set aside R1,5 million for this purpose in 1986-87.

5.3.8 South West Africa

The amount of R476,5 million provided in the Budget is R169,5 million (or 55%) more than for 1985-86. This sharp increase is not the outcome of large-scale extensions but represents the transfer of the responsibility for the provision of certain services from the Republic to South West Africa. For example, by agreement South West Africa had to make provision with effect from 1 April 1985 for the compensation, on a phasing-in scale, of operating losses on railway and road transport services within the Territory. In 1985-86 the Territory had to bear 70% of the loss and South African Transport Services 30%, whereas from 1986-87—the second year of the agreement—South West Africa must bear 80% and the South African Transport Services 20% of the estimated operating losses. In addition the Territory must bear the financing costs of certain assets. The sum of R36,3 million is required for this purpose. From 1986-87 South West Africa also takes over services to the amount of R30,5 million from the South African Police.

Finally, R60 million in respect of foreign loans must be redeemed by South West Africa in 1986-87. It is accepted that in the current circumstances these loans will not be rolled over, and the Estimate of Expenditure of the Republic therefore provides for this redemption. Moreover it appears that the public debt in the Territory will decline.

If the above factors are left out of account this service shows an increase of only 13,9% on the 1985-86 figure of R307 million.

5.3.9 Marginal gold mines

Certain mines (known as marginal gold mines) receive State aid under the Gold Mines Assistance Act, No 82 of 1968. This stems from the time when the price of gold was not market-related, and it was intended as a bridging measure until the gold price rose.

Circumstances have since changed, however, and on grounds of pure macro-economic considerations this aid is no longer justified—a conclusion come to some years ago by the Franzsen Committee.

My colleague the Minister of Mineral and Energy Affairs agreed with me in November 1985 to end this scheme and to notify the mines concerned. It will be replaced by an ad hoc scheme judging individual cases on merit—a scheme that can be applied in line with the ruling fiscal and economic objectives.

5.3.10 Liabilities concerning the public debt

The Estimates make provision for R5,233 billion for the servicing of public debt, of which R5,195 billion is for interest. This interest component is 11,9% above the revised 1985-86 figure and 18,1% above the budgeted figure. The increase arises chiefly from the rise in the average rate of interest on Government loans.

5.3.11 Bread subsidy

The Government has accepted the recommendation of the Commission of Inquiry into the Government’s System of Bread Subsidies (the Davin Commission) that the subsidy be phased out. The subsidy on bread, which amounted to R200 million in 1985-86, will be reduced to R150 million in 1986-87.

5.3.12 Suspension of expenditures

The technical and timing contingencies surrounding the printing of the Estimates are such as to preclude the incorporation at short notice of the effects of the latest economic or other developments.

The recent favourable changes in the economic parameters, and especially those originating in the firmer exchange rate and the lower fuel price, as well as the uncompleted savings effort in the sphere of staff-related costs, have led to a Cabinet decision that the sums included for appropriation in the Estimates for 1986-87 totalling R31,806 billion, be reduced by 2% throughout. The Treasury will implement this by suspending appropriate amounts in terms of section 8 of the Exchequer and Audit Act. The sum involved will be R636 million, which will bring total expenditure down from R37,447 billion to R36,811 billion.

5.3.13 The Year of the Disabled

The incidence of physical disability is calculated in developed countries at about 10% of the population. Hon members will thus appreciate that the number of the disabled in our country is large. The Government has therefore thought it appropriate to give the question special attention and has decided that 1986 will be known as the Year of the Disabled. It has also been decided that a plan will be drawn up for the care of the disabled; the State President recently made a public announcement in this connection.

The normal expenditure on education for the disabled will be about R145 million in 1986-87. In addition to this and other services already being provided, an extra R10 million has been included in the Budget, which will support the costs of special accommodation, appliances and so on. An extensive program of media coverage of the subject of the physically disabled will also be launched. The pinnacle of the program will be reached in nation-wide sporting events for the disabled. Furthermore, a special proof silver Rand will be minted later this year to commemorate the Year of the Disabled; a portion of the proceeds from its sale will be channelled to disability care.

The responsibility of providing for the physically disabled does not rest with the State alone. The interest and involvement that the private sector has already shown is gratefully acknowledged.

5.4 Supplementary proposals: Expenditure

5.4.1 Job creation

As announced during the debate on the Additional Appropriation, the R70 million representing the remaining portion of the R600 million allocated for job creation in 1985-86 will be made available for the continuation of this service in 1986-87. Since the Government is fully convinced that this deserving project should be expanded, a further R90 million is now being allocated, while R75 million is also being provided for the continuation of training of the unemployed—thus R235 million in all.

The additional R75 million will virtually double the training effort in 1986-87, which means that about 550 000 people will be able to receive training.

These programmes help to promote the skills and the human dignity of the unemployed, to enhance their value for the community, and to enhance their chance of contributing to the economic progress of our country.

5.4.2 Small Business Development Corporation (SBDC)

One component of the R600 million program for work creation and relief was a sum of R75 million earmarked for work creation via the SBDC. In view of the start-up time involved in launching such a programme, only R47 million could be utilised in the present financial year.

The remaining R28 million would originally have been reappropriated in the new financial year as part of the supplementary expenditure proposals. In the meantime, however, the Department of Trade and Industry found it possible to find this amount via savings, and the R28 million will now be paid over to the SBDC as a starting balance for further work creation programs for 1986-87.

By virtue of the particularly high premium the Government places on the expansion of the small business sector, however, no corresponding cut will be made in the supplementary proposals for 1986-87; on the contrary, a sum of R30 million will now be invested in the SBDC as share capital. The Government trusts that the private sector, as partners in the SBDC, will follow this example and contribute an equivalent amount in share capital.

5.4.3 Upgrading of infrastructure for Black people

On 15 August 1985 the State President announced that R1 billion would be spent over the next five years in upgrading the infrastructure of underdeveloped areas. A sum of R100 million had already been set aside in 1985-86 to launch this high-priority project. As planning is far advanced the momentum will be greatly accelerated in 1986-87 by the allocation of R320 million for this service. This expenditure level is estimated to be the optimal one for 1986-87.

This provision supplements that of R311 million to which I have already referred, and brings the total sum that will be made available in 1986-87 for this improvement of infrastructure and for Black housing to R631 million.

5.4.4 Pensions and welfare

The Government is fully aware of the financial problems of social and civil pensioners and has, just as in the case of all the other high-priority services, sought to give the utmost relief within its financial constraints. I am happy to announce the following improvements in pensions and allowances.

5.4.4.1 Civil pension

The concession will apply from 1 October and will be applicable only to those who retired before 1 April 1986. It comprises an increase of 1% for each completed year after retirement up to 30 September 1986, with a minimum of 7½% and a maximum of 15%. The increase will require a sum of R30,9 million for the 6 months in 1986-87. Normally a large portion of the cost of the increase in civil pensions is borne by the Stabilisation Account for Civil Pensions; but that account is temporarily exhausted as a result of previous increases. The Government Service Pension Fund will, as an interim measure, bear these additional expenditure in 1986-87. The resulting deficit in the pension fund will have to be made up by the Exchequer in the financial years following.

The same increase in pensions applies to holders of political office and to others whose pensions are paid direct from the State Revenue Fund. The cost in 1986-87 is estimated at R1,4 million.

5.4.4.2 Military pensions

The hon the Minister of National Health and Population Development has approved a revision of the benefit structure for this group, as from 1 October 1986. The new structure will mean that parity between population groups is achieved in the benefit scale for military pensions. Moreover, an additional benefit category is introduced, for graduate beneficiaries. Uniform pensions of R600, R750 and R1 000 per month respectively will be payable in the revised categories. My colleague has also approved a supplementary allowance, with a maximum of 25% of a member’s pension, for certain people who have a disability of 80% at least and who qualify for the allowance. This supplementary allowance applies from 1 October 1986. The proposed improvements are estimated to cost R3,9 million in 1986-87.

5.4.4.3 Social pensions

Social welfare, like housing, is an own affair and will be dealt with in the three Houses. It is a pleasure to announce that a total of R170 million has been set aside for social pensions and allowances for all population groups. The hon the Minister of National Health and Population Development, in conjunction with the functional Ministers responsible, has allocated this sum. Particulars of the allocations and the resulting improvements in pensions and allowances for each population group will be announced by the Minister as soon as possible.

5.4.4.4 War veterans

In response to requests from various quarters it is also a pleasure to announce that the Government has decided that veterans— from all population groups—of the First World War, will no longer be subject to a means test to qualify for a War Veteran’s Pension. Those falling into this category are now able to make immediate application for such a pension. Without reliable data on the number likely to benefit from this, it is virtually impossible to make a meaningful estimate of the additional expenditure. Hon members may accept that it will be minimal by virtue of the small number of potential beneficiaries. My colleagues will provide further details in due course.

5.4.5 Adjusted expenditure level

After the proposals involving expenditure cuts (R636 million) and supplementary expenditure proposals (R760,3 million) have been allowed for, total estimated expenditure for 1986-87 rises from R37,447 billion to R37,571 billion—an increase of only 13,9% on the revised figure for 1985-86.

In view of the fact, however, that in the middle of 1985-86 a deliberate change in emphasis was made in the State’s expenditure policy—something that is also reflected in today’s expenditure proposals—it would probably be more meaningful to look at the average increase in the expenditure level for the 1985-86 and 1986-87 financial years, which is 17,7%. In the light of the economic conditions now ruling, the necessity of stimulating the economy moderately, and the present level of inflation, hon members will agree with me that these increases cannot be considered unduly high.

5.4.6 Additional Budget

Inasmuch as any budget is necessarily subject to a degree of uncertainty in consequence of the relatively unstable nature of the local and international financial and commodity markets, it is sometimes desirable to make provision of some kind against contingencies.

At the time of the submission of last year’s Budget it was clear that certain additional expenditures, such as drought relief, would be unavoidable. The extent of these additional expenditures could however not be determined at that stage, and therefore a sum of R400 million was earmarked in the Budget Speech for the part-financing of those expenditures.

The Treasury is not at present aware of any specific new risk or potential under-provision in the 1986-87 Budget, and it is therefore, as is customary, not considered necessary to provide in the Budget for any special expenditures. If however unforeseen circumstances should demand increased expenditure, it will as far as possible be financed from realised savings by departments and/or from any increase in tax revenue that may occur during the course of the year. This precautionary measure should provide reassurance not only that unavoidable budget overruns will be financed in a sound manner—namely without money creation and/or additional pressure on the financial markets—but also that such amounts will be kept to the minimum.

†5.5 Tax Concessions

As a result of the proposals regarding provisional tax, stamp duty and marketable securities tax and the import surcharge on books, the revenue for 1986-87 increases from the initial estimated total of R34,430 billion to R34,771 billion. The deficit before borrowing is at this stage therefore R2,8 billion, or merely 1,9% of the estimated gross domestic product—which, in the current economic circumstances, means much too restrictive a budget. It is commonly accepted that a deficit of about 3% of gross domestic product can still be easily financed without putting any undue upward pressure on the pattern of interest rates. Furthermore, capital expenditure will be some R4,25 billion during the next financial year. A moderate stimulus of the economy via tax relief is therefore both warranted and desirable and the following tax concessions are thus proposed.

5.5.1 Personal income tax

5.5.1.1 Savings

The problems surrounding the inflow of new foreign capital, and the necessity of a still higher savings propensity in order to create a larger capital base for the financing of the required rate of economic growth, are well known. Hon members will also recall that the amount of interest income exempt from tax was raised last year from R100 to R250.

To reinforce our efforts to enlarge the savings pool it is now proposed that the exemption limit be doubled to R500 per year. At current interest rates this means that the interest on a taxable investment of about R4 000 at a financial institution will be exempt from tax. A still higher concession would have been desirable, but our budget flexibility in this regard is unfortunately limited. This concession will naturally also be to the advantage of retired persons, who depend greatly on interest as a source of income. The loss of revenue arising from this concession alone will amount to R72 million for the coming year and to R107 million for a full year.

The higher interest exemption also comports with the view that saving in general, rather than with specific institutions or through particular instruments, should be encouraged. For that reason it is not now possible to react positively to the representations made for greater concessions with regard to pension and retirement annuity funds or premiums on life assurance policies.

5.5.1.2 Fringe benefits

Legislation providing for the systematic valuation of fringe benefits came into force on 1 March 1985, and things have so far proceeded smoothly, the problems having been identified and systematically solved. Although it is difficult at this stage to estimate the precise proceeds that will come from this source, the increase in employees’ tax collections indicates that it will be significant. This would seem to bear out the presumption that the practice of remunerating workers partly through fringe benefits was occurring on an even greater scale than originally thought.

A further stage of the phasing-in of tax in certain fringe benefits commenced on 1 March 1986. The undertaking has been given in the past that the tax is not primarily directed at raising total State revenue but instead at the more equitable distribution of the tax burden; to adhere to this undertaking the additional revenue coming from this tax has previously been utilised, and now with the abolition of the 7% surcharge will again be utilised, to lower the general level of personal taxation.

Over the past few months representations have again been made for the freezing of the phasing-in period for certain fringe benefits, on the ground that this would boost trade and industry. Although one naturally has understanding for such representations, it should be borne in mind that an exceptionally long phasing-in period has already been allowed, and furthermore that the taxable values are not unreasonably high. Indeed, little if any phasing-in has been granted in other countries. We have sounded the Margo Commission on this and they fully support our approach. Longer phasing-in periods can therefore not be supported. However, the abolition of the 7% surcharge and the further proposal now made with regard to tax rates should bring not unappreciable relief to those in the middle- and upper income groups, who are particularly affected by fringe benefits taxation.

5.5.1.3 Working married couples

There are various schemes whereby the problems that have built up around the tax burden of married couples can be eliminated. Each, however, suffers from the disadvantage that the accompanying loss of tax to the fiscus would be unacceptably high in the current economic climate. The search continues for an acceptable compromise between a theoretically-sound and an affordable solution, and this too is being thoroughly researched by the Margo Commission. Proposals in this regard can therefore not be considered without the benefit of the Commission’s perspective. In the meantime, the problem of the additional sum that married couples must find on receipt of their assessment has aroused further emotions.

The entry of married women into the professional and labour market is a world-wide phenomenon, and one that in South Africa with its great shortage of skilled labour power is of growing importance. The Government has a close understanding of the position of the working wife, and to provide interim relief for the working married couple the following adjustments are proposed: the R1 600 of the wife’s net earnings that is presently exempt from tax will in future be 20% of her earnings with a minimum of R1 800 exempted from tax. In practice it amounts the following: if the wife’s salary is R20 000 per annum the deduction will be R4 000 as against the present R1 600. This generous concession is applicable to the tax year that ended on 28 February 1986, and should bring tangible relief for working married couples. It involves a loss of revenue of no less than R116 million for 1986-87.

It should be noted, however, that the large sums married couples stand to pay on assessment cannot be blamed on the present tax structure per se, but spring rather from the fact that in many cases the tax deduction tables applicable to working women frequently (and particularly in the upper-income group) do not provide for adequate deductions to meet the actual tax liability. This is due mostly to historical factors but also to the fact that it is impossible, without making the system still more complex, to prescribe tables to meet all possible permutations of the spouses’ incomes.

The Commissioner for Inland Revenue proposes, however, by virtue of the powers conferred on him in the Income Tax Act, to prescribe amended tables applicable to married women. These will come into force on 1 July 1986, and will provide for deductions more in line with the wife’s portion of the tax payable on the joint income. These more realistic deductions will appreciably reduce the balance payable on assessment.

From the point of view of the Exchequer this advance in the collection of tax due will generate a cash flow of R58 million.

5.5.1.4 Rate adjustments in respect of individuals

Hon members will recall that the rates for normal tax payable by individuals were adjusted last year. This was done, firstly, to bring relief to those in the group with income below R12 000 by raising the thresholds substantially, and secondly, to lower the tax rates for income segments between R12 000 and R60 000 in the case of married persons, or R12 000 and R42 000 in the case of unmarried persons. These rates apply to the tax year beginning 1 March 1985, and the downward adjustment of the rates coincided with the introduction of the fringe benefits provisions. Due to technical reasons the lowering of the rates was more than the envisaged increase of revenue from tax on fringe benefits. In order to adjust for the difference more accurately and to increase revenue it was necessary to levy a 7% surcharge.

With a view to giving individuals relief and in line with the policy of moderate stimulation of the economy, the State President announced on 18 November 1985 that it would be recommended that the 7% surcharge be abolished with effect from the tax year beginning 1 March 1986. New tax tables have been issued and employees are already enjoying lower tax deductions. The loss of tax arising from the abolition of the surcharge is estimated at R500 million for 1986-87 and R588 million for a full year. This loss of tax is not reflected in the revenue estimates. When this decision was taken, the fact that a further phasing-in of the taxation of fringe benefits would take place on 1 March 1986 was fully allowed for and in terms of declared policy the one was offset against the other.

Although the scope for further concessions is very limited, it is nonetheless thought necessary that in the present economic circumstances, the tax burden on individuals be further eased. It is therefore proposed that a discount of 5% be granted to all income groups, with effect from 1 March 1986 on the net normal tax payable, as determined after deduction of tax rebates. The basic progressive rates introduced last year therefore remain unchanged, although the maximum marginal rate now reduces from 53,5% to 47,5%, that is by 6 percentage points. The income notch at which the maximum rate is reached remains R60 000 for a married person and R42 000 for an unmarried person. The fact that the maximum marginal rate is now less than 50% illustrates the desire of Government to give the necessary incentives to entrepreneurs and high-level manpower, which play a meaningful role in economic development and job creation.

To appreciate this concession fully one should look not only at the marginal but also at the effective tax rates. It will then be seen, for example, that the effective rates of a married person, without children, earning R60 000 in 1986 was 35,3%. The new proposal reduces it to 31,5% in 1987—a tax reduction of R2 331.

The additional loss of tax involved in the 5% discount is R494 million for 1986-87 and R555 million for a full year. The total loss of tax from the rate adjustments is thus R994 million for 1986-87 and R1,143 billion for a full year. This generous concession and the aforementioned concession in respect of wives’ earnings should afford appreciable relief to a very large body of taxpayers, including those with fringe benefits.

The following example indicates what a considerable benefit will be received by a married couple with two children where the husband earns R25 000 and the wife R15 000. Their joint taxation will decrease from R10 171 in the 1986 tax year to R8 491, a saving of no less than R1 680, or 16,5%.

5.5.1.5 Employees’ tax: individuals

As already mentioned, adjusted tax tables applicable to working married women will come into force on 1 July 1986. In the case of all other employees, the Commissioner for Inland Revenue will authorise employers immediately to subtract 5% from the employee’s tax payable according to the employees’ tax tables that came into force on 1 March 1986. It will thus not be necessary to issue new tables in this case, and the benefit will accrue to the taxpayer immediately. In effect, certain individuals will therefore receive a substantial rebate of more than 11% on their tax accounts as from 1 March 1986.

5.5.2 Estate duty

The phasing-out of estate duty in its present form is now being taken a step further in anticipation of final proposals that will probably be announced next year.

Both the deductions allowable in the determination of the taxable value of an estate and the tax rates themselves have, in contrast with those in respect of individual income tax, remained unchanged for several years. Inasmuch as the nominal value of an estate, like the nominal income of an individual, has risen and is likewise subject to a progressive tax rate, it is desirable that relief be afforded. I propose thus that all deductions in terms of section 4A of the Estate Duty Act be doubled. At the same time the rates of estate duty will be changed so that the maximum rate of 35% is reached at R800 000 instead of the present R400 000. These concessions will apply to the estates of persons dying on or after 1 April 1986. That this proposal involves a substantial concession is evident from the fact that for a person with an estate of R450 000 leaving a spouse and two children the estate duty liable is reduced from R45 000 to R9 000.

By reason of the time involved in winding up an estate, the estimated loss of revenue for 1986-87 will be only R20 million.

5.5.3 Adjusted total for revenue

The estimated cost of the immediately preceding concessions is R644 million. Add to this the R500 million loss of revenue involved in the abolition of the 7% surcharge on individuals (which is not provided for in the printed estimate) and the previously adjusted total for revenue falls by R1,144 billion to R33,627 billion.

5.6 Deficit before borrowing

The final deficit before borrowing now becomes R3,944 billion, which is approximately 2,7% of the estimated gross domestic product. This sum is substantially less than the capital component of the expenditure budget, which means that loan financing will not be necessary to cover current spending.

If the total loan redemptions for 1986-87 are added to the deficit the financing requirement for 1986-87 is R5,508 billion. Details of the redemptions are included in the summary statement.

5.7 Financing

5.7.1 Public Investment Commissioners

The enlarged payroll to be financed by the Exchequer, and the resulting higher pension fund contributions will naturally increase the cash flow of the Public Investment Commissioners substantially. This will be supplemented by the high return being earned on the existing portfolio by virtue of the high interest rates of the past years. It is therefore anticipated that the commissioners will invest R3,250 billion in government stock in 1986-87, as against the revised estimate of R3 billion for 1985-86 and the original estimate of R2,5 billion.

5.7.2 Bonds

The concession regarding interest income is expected to have a favourable effect on the issue of bonds by the State. New sales of R140 million are expected which is somewhat higher than the amount envisaged in the revised estimate for 1985-86.

5.7.3 Foreign loans

In view of the standstill arrangements currently in force, no provision is made to take up new foreign loans in 1986-87.

5.7.4 Rollover of government stock

Government stock to the amount of R1,225 billion mature in 1986-87. It is assumed, as usual, that the full amount will be re-invested in government stock.

5.7.5 Financing required from the sale of new government stock

The available finance referred to above is R4,615 billion, leaving a requirement of R893 million of new funds, which it is proposed be raised by way of the issue of new government stock. This sum is appreciable smaller than the revised figure for sales of new stock in 1985-86, namely R1,566 billion. So modest an amount will definitely put no pressure on the money or capital market and will easily be financed from the non-bank private sector—that is, in a non-inflationary manner.

5.8 Gold and foreign exchange contingency reserve account

No provision has been made for any transfer to the Reserve Bank to cover losses originating in the Bank’s transactions, on behalf of the Treasury, in gold and foreign exchange. In the light of the present foreign debt situation it is important that the funds available in the domestic capital market be used for productive purposes: consequently, the Treasury will not borrow more in the market at this stage than is actually needed. Meanwhile the Reserve Bank will continue to carry these losses as a claim against the Treasury on the Gold and Foreign Exchange Contingency Reserve Account.

If during the course of the year it appears necessary as part of sound monetary policy for the Reserve Bank to sell more stock than is needed by the Treasury, the proceeds from any additional sales will be used to reduce the balance on this account.

6. COMPARATIVE STATEMENT OF THE STATE REVENUE ACCOUNT

As is customary, a comparative statement of the Government’s accounts is subjoined in the printed version of the Budget Speech.

7. Conclusion

This Budget addresses itself primarily to the people of South Africa and their needs; it thus gives relief over a wide spectrum where the need is greatest. For those who will not be sharing in the tax concessions, provision is made on the expenditure side.

Generous provision has been made for the upgrading of living conditions, particularly those of people in the less-developed areas and communities. In total R631 million has been made available in 1986-87, inter alia, for the improvement of the infrastructure and housing of Black people. A sum of R6,082 billion has been provided for all population groups for the important function of education, which is an increase of 19,3% on the budgeted expenditures for 1985-86. The elderly too have been kept in mind, with proposals for adjustments in military and social pensions.

The Budget has however also left room for certain concessions to every individual taxpayer, as a result of the abolition of the 7% surcharge in income tax, the concession for married couples, the 5% rebate of tax on individuals, and other smaller adjustments, a total concession of R1,144 billion has been made.

However, the Budget also takes fully into account the current economic conditions and the limitations they impose. For example, we cannot afford to leave the unacceptably high inflation rate out of account or to ignore our obligations regarding the repayment of foreign debt, it is therefore important that the increase in total proposed expenditure be kept within limits. Against this background the increase in total expenditures for 1986-87, which is 13,9% above the final level for 1985-86, can be considered reasonable. It is much below the current rate of inflation.

The estimated deficit before borrowing, which determines the Government’s net borrowing requirement, is R3,944 billion, or about 2,7% of the estimated gross domestic product. This is well within the guideline of 3% set in last year’s Budget. The upshot is that the Government’s claim on the domestic capital market during the next twelve months will be only R893 million. This should provide sufficient room for the rest of the public sector and for the private sector to satisfy their capital requirements on the local market at reasonable rates of interest.

As a further discipline the Government’s total borrowing requirement has been kept below the total intended capital spending for 1986-87. No current expenditures will thus be financed by borrowing.

Provision has also been made for continuing investigations into improvements in the system of determining priorities in the public sector, involving both capital projects and current expenditures. These investigations supplement the work of the Margo Commission, which it is hoped will report during the course of the year.

South Africa is blessed in that it has in difficult circumstances been able to do as much in the material sphere for its people as this Budget does. For that we should all be grateful.

Finally, I wish to express my warm thanks to the State President for his constant encouragement and support; to my Cabinet colleagues for their understanding and cooperation; and to the hon the Deputy Minister of Finance and of Trade and Industry, who has ably assisted me in the administration of my portfolio. I should also like to pay tribute to the former Director-General of Finance, Dr Joop de Loor, who has so deservedly been elevated to the high office of Auditor-General. His place is now filled by Dr Chris Stals, who comes to us from a distinguished career as Senior Deputy Governor of the South African Reserve Bank, and who, in addition to his heavy departmental responsibilities, has ably chaired the Standstill Co-ordinating Committee charged with renegotiating our foreign debt. To him and his staff I express my sincere appreciation of not only the expertise and dedication behind today’s Budget but also the splendid esprit de corps of our department. I should also like to thank the Standing Committee on Finance for its valuable work, particularly that involving financial legislation.

TABLING

Mr Speaker, I now lay upon the Table:

1. (1) Estimate of Expenditure to be defrayed from State Revenue Account during the financial year ending 31 March 1987 [RP 2—86];
2. (2) Estimate of Revenue for the financial year ending 31 March 1987 [RP 3— 86];
3. (3) Statistical/Economic Review [WP B—86];
4. (4) Comparative figures of revenue for 1985-86 and 1986-87;
5. (5) Taxation proposals [P 1—86].

Bill, Budget Speech and papers tabled referred to Standing Committee on Finance in terms of Joint Rule 43.

Second Reading resumed

Mr Speaker, I want to begin by expressing some thanks to the members of the Standing Committee on Finance, and in particular to the chairman of that committee for the manner in which he conducted the affairs of that committee. I also want to express my gratitude for the manner in which members of the standing committee co-operated in order to produce what must be seen as a very important report for this House to consider. I should also like to add to those thanks a word of appreciation to the officials of Parliament concerned, particularly Mr Ferreira, who is in charge of that standing committee, as well as his staff, and also Mr Wronsley from the Treasury and the people attached to his office. We received nothing but co-operation from them.

Those hon members of this House who will really read and study the report will, I believe, see in it matters of considerable consequence insofar as the finances of the country are concerned. I may also put it both to the hon the Minister of Finance and the hon the Chief Whip of Parliament that the committee has some problems which are not of its own making, but which are owing to the rules and the practices which exist. We do hope, however, that those problems will be removed in due course so that the committee will be able to function more efficiently in the years ahead. I must tell you, Sir, that the one thing which does work is that committee. It is indeed one of the things which really works and which also makes a contribution to the proceedings of this House.

Furthermore, Sir, in order to clear the decks for the debate which is to follow, I move immediately as an amendment to the motion of the hon the Minister of Finance, the following:

1. (1) to eliminate the inefficiency, wastage and unproductive expenditure which have characterised the Government’s administration of the affairs of South Africa;
2. (2) to abandon policies, including the policy of apartheid, which have caused the political and economic position of the country to be at one of the lowest points in its entire history; and
3. (3) to demonstrate that it has realistic plans to restore the health of the economy, restore stability and ensure the future of all South Africa’s people in a society which has the economic and political values of the free world.”.

In the period between the presentation of the Budget and this particular debate there has been more than adequate time for economists, financiers, businessmen, consumers and everybody else to consider, examine and analyse the Budget and to study its implications.

Initially, there was a degree of euphoria in some circles. Personal tax relief and concessions for working married women had some appeal. Estate duty concessions with forecasts of its abolition were enthusiastically received by the potential heirs of the rich.

The Budget, too, was presented as one which purported to keep the total of Government expenditure within reasonable limits and also to keep borrowings at unexpectedly low levels.

Closer examination of the Budget has, however, demonstrated something a little different. It has demonstrated, firstly, that the expenditure figures lack credibility and that Government expenditure in the current year is likely to exceed the budgeted figures. That revelation is based on the history of what has transpired over the many years since this Government has been in power. When the hon the Minister said in the Budget debate last year that he was going to, as it were, turn over a new leaf and that there would be a new dispensation in regard to Government expenditure, I said to him that “the proof of the pudding would be in the eating.” As it has turned out, the hon the Minister of Finance has followed the example of his predecessors; and his credibility in regard to the figures reflected in the Budget is no higher than that of any of his predecessors.

Allow me to read to hon members an extract taken from Sake-Rapport. The extract relates to the credibility of the Government. I quote:

*What has therefore happened in South Africa as a result of the loss of credibility of the various Ministers of Finance, is that people no longer believe anything whatsoever. [Interjections.]

†They do not believe anything. They do not believe it even if it seems as if it is right because of the lack of credibility of this Government and its budgeting which has reduced this whole issue of when figures are presented to a farce. The reality is that nobody believes it any more.

The hon the Minister comes again this year with a 2% cut across all expenditure, and it has now been clearly established from the evidence that that was an arbitrary cut. Last year he objected when the word “arbitrary” was used but this year we have got the clear evidence not only of himself but also of his officials that what in fact happened is that in these circumstances the Cabinet met, the State President was brought into the picture and they decided to have an arbitrary cut of 2% across every vote. The particular departments were not consulted and it is conceded that they should have been consulted. One of the things that became apparent from the evidence given to the standing committee is that it is quite impossible to apply that 2% cut to certain departments. Unfortunately, due to the time available, we could not hear all the departments, and the committee in its report gives two classic examples. The hon the Minister of Foreign Affairs, who to his credit came himself in order to give evidence, put the case that he could not meet those targets and he did now know how he was going to achieve the 2% reduction without serious implications for the functioning in his department and for the interests of South Africa. If that is not an arbitrary cut I do not know what is.

The second department is that of Police. Here the report highlights the fact that if this cut is implemented it will affect 2 000 posts in the Police. I want to ask one person in the NP, starting with the hon the Leader of the House, the hon the Minister of Transport Affairs, whether he wants the Police Force to be cut down this year by 2 000 men.

No.

He says no. Nobody wants it. Why did the hon the Minister vote for the arbitrary cut? [Interjections.] I shall tell him why. [Interjections.] Pardon? I did not hear. I shall tell the hon the Minister why. When the hon the Minister wanted to effect the cut, he should have done what was eventually said in evidence. If one wants to save money, one should consult one’s departments and deal with them individually to see where one can save. Nobody has any objection to that.

For anybody, whether it be the hon the Leader of the House—I am sorry that I picked on him because he is quite a nice guy—or any of the others—they are all in the same category—to sit in a Cabinet meeting and to say that they did not consult the departments and that they want an arbitrary cut, verges to my mind on a degree of irresponsibility. [Interjections.]

It is an interesting question whether the hon the Minister of Law and Order voted for this. Did the hon the Minister vote for the 2% cut?

I did not vote for a reduction of 2 000.

Oh, but he did. That is the whole point.

One matter is very clear: The Budget this year will exceed the figures that the hon the Minister has presented. There is no credibility attached to these figures and nobody can accept that there will be any realism insofar as these figures are concerned.

The third issue is that the Budget does very little to address the problem of inflation. The Government has not accepted the reality that inflation can be combated without negative effects on the growth rate. Fighting inflation need not be inconsistent with encouraging growth. High inflation is actually detrimental to growth in the economy. That is what needs to be accepted.

One does not have to take my word for it; one can look at the evidence that was given to the committee. An example is the evidence of Assocom. They said: “Of major concern is the minimal reference in the Budget to inflation.” It goes on to deal with that in greater detail in the evidence that was presented.

The hon the Minister himself gave evidence. He put forward many reasons why he thought inflation was not being encouraged. However, when one analyses the Budget one finds that it does not really address itself to the question of inflation.

Let us deal with the fourth point, namely the incentive to save. I would have imagined that at the present time, when there is a dramatic need in South Africa for capital formation and there are problems with regard to foreign loans, there would be truly meaningful incentives to save. How can one persuade someone to save at an interest rate of 14% when the inflation rate is close to 20%? If you were doing that, Sir, you would not be getting the correct financial advice. I hope you are not doing so. That is the reality and that is where the Government has failed. With respect, it has not given the necessary incentives which are so vital at this stage for capital formation in South Africa.

Fifthly, some measures were adopted to relieve poverty and create employment, and for these we are grateful. However, the reality is that, just as I told the hon the Minister last year that his measures were inadequate—he had to swallow his words within a matter of months—I have to tell him again that the measures contained in this Budget for the creation of employment are totally inadequate and utterly insufficient. I am going to enlarge on that later in my speech.

Perhaps the greatest problem and most serious defect is that this Budget does not address itself adequately to the problems which face the country. A stockbroker commented in a circular that this Budget “bows to political pressures”. Significantly, he and other stockbrokers advised people—no doubt those who could not get insurance company shares—to buy shares in the retail and service sectors rather than in the real production sectors. That demonstrates the lack of faith that there will be meaningful growth where it is most needed in South Africa.

It is quite remarkable that the Nationalist Press hailed this Budget and said, “Suid-Afrika kan breed glimlag”. I would like to know—perhaps the hon the Minister of Environment Affairs and Tourism who is listening so carefully can tell me—who in South Africa is actually laughing or smiling about this Budget. What is there to smile about in South Africa today with regard to this Budget? What is there to smile about as a result of this Budget if one is an ordinary South African? Does the hon the Minister not lose his credibility when he presents a budget to the public which has all the trimmings to create the impression that it is something to smile about, but when one analyses it, it is the very opposite?

In reality the Budget is a sort of a Mr Micawber budget. The hon the Minister of Finance should perhaps be named Micawber because he is waiting for something to turn up. What he is waiting for, I do not know, but he is waiting for something to turn up because he has not actually dealt with anything in his Budget. His budget is patch-work. It is temporary. It is a one-year accounting exercise. It definitely is not a carefully planned, long-term programme to get us out of the mess in which this country has landed. There is no long-term plan …

The hon member is just about the best example of a Micawber in the House. He is always trying to make something turn up.

And something always does turn up. There he is! There is one in every House and the hon the Minister of Environment Affairs and Tourism is the classic example. One just has to wait for him, and he is there. I am never disappointed in that hon Minister. I am very grateful for his presence. [Interjections.]

The greatest indictment of this Budget is the fact that South Africa needs long-term plans. South Africa needs imagination to take us out of the morass in which we have landed. I challenge any Minister of the Cabinet—including the hon the Minister of Environment Affairs and Tourism, if he wishes to take the bait—to tell us how he sees South Africa in the year 2000. What will South Africa look like in the year 2000? What will it be like? What kind of a constitutional structure are we going to have in the year 2000? What kind of an economic system are we going to have in South Africa? What kind of unemployment are we going to have in South Africa? What plans do they have to overcome the problems of the future? That is in fact the tragedy of the whole situation.

I can give hon members a classic example which may perhaps be regarded by some as unimportant, but which to me is a very important one, namely that when there was money available last year for the relief of poverty and unemployment, the Government could not even spend that money that was available even though it was in fact a relatively small amount, and it had to be returned to the coffers. At the same time, while it could not spend the money …

We could have wasted it!

“We wasted it”, he says!

No, we could have wasted it if we had spent it.

No, that is the tragedy. At the same time that they could not spend the money, in some parts of the country the programmes had to be brought to a halt because there was insufficient money available. That does not make sense. Nothing could be clearer that this does not make sense when one finds oneself in a situation where there is money available to alleviate poverty and one is not even able to spend it all while in certain parts of the country there is a crying need for it. How anybody in South Africa cannot spend money efficiently for the relief of poverty and unemployment is beyond the comprehension of ordinary human beings. It is absolutely beyond their comprehension.

The reality of the situation is therefore that unless there is an actual long-term plan on the part of the Government—something which actually looks into the future and plans for the future—we are going to find ourselves sliding down the slippery slope of higher and higher inflation, a debased currency, of more and more unemployment and more and more resultant instability. The reality is that it is the economic conditions which have been a major contributor towards instability in South Africa. That is the price that we have had to pay for wrong Government policies and inefficiencies, and that is a price that the whole of South Africa is paying and may have to pay for a long time. It is a pointless exercise the hon the Minister for Finance is trying to do by pretending that we are living in normal times and presenting stereotyped budgets with only gestures without substance to deal with our problems.

I want to deal immediately with what he has boasted most about, namely his tax cuts. Let us look at what he has actually done.

The State President announced months ago that the surcharge was to be abolished and that announcement was repeated in the Budget. Then there was a discount. However, when one actually looks at these figures pertaining to those affected by this discount, and when one analyses those figures, one is faced with the reality of what those tax cuts mean.

If one allows the standard deductions for medical expenses and the existing rebates, then one is faced with the following situation. There are no benefits of any kind for a person whose taxable income amounts to R6 000 or less. This is because a person in that bracket does not pay any tax if he is married, is under 60 and has no children. Therefore, it is of no benefit to those people, because they do not pay tax in any case.

Furthermore, if a person is married, has no children, is under 60 years of age and is earning R6 500 per annum, then the concessions are worth R4 a year to that person. At R7 000, they are worth R8 a year. At R7 500, they represent a tax saving of R12 a year.

If one is under the age of 60 and married with a child, and if one earns R6 500 or less, then these concessions are meaningless, because one does not pay tax. At an annual earnings level of R7 000, the concessions are worth R3; at R7 500, they amount to R7; and at R8 000, they are worth R11. Let us take a look at whom this affects. Let us look at the tax picture.

There are no accurate statistics at the moment in respect of the levels of Black taxpayers in South Africa. Hopefully, there will be some this year. The latest available statistics are the ones which I am about to quote. In regard to Whites, Asiatics and Coloureds, there were 2 074 879 taxpayers, according to the latest available figures, ie those released in 1984. I concede immediately that inflation has taken many of them up into a higher bracket. However, I believe that the principle and the relative percentages will be much the same.

What is significant, however, is that of those 2,074 million, a total of 781 322 had a taxable income of R6 000 or less. There were 113 836 people who earned between R6 000 and R7 000 and 101 045 who earned between R7 000 and R8 000. Therefore, of the total of some 2 million taxpayers, over a million of them received minimal benefits from this tax concession. [Interjections.] Hon members ask why that is the case. [Interjections.] The reason is that they were subjecting themselves to political pressure from pressure groups and, furthermore, they would not reduce GST. That is why! [Interjections.] If they had reduced GST instead of doing this, it would have had an effect across the whole population. Black, White, Coloured, poor, and rich—everyone would have benefited. [Interjections.] If hon members want to know the answer, that is the real reason. That is also why I say that these tax concessions are of no benefit to the bulk of the population of South Africa …

You are a socialist.

Am I a socialist? The hon member for Turffontein says I am a socialist. If one is a socialist when one worries about the poor and the lower income groups, when one is concerned about people, then by that definition I am a socialist and then I do not make any excuse for it because the moment one pleads for the poor in this House, one is called a socialist. [Interjections.] I think the hon member for Turffontein should be put in his place because it does not mean that one is a socialist when one pleads for the poor. [Interjections.] It is nonsense to say that, and it is a typical example of the smear tactics that one comes across when one tries to discuss anything logically in this House. [Interjections.]

I shall go further though, and give the hon member more of an opportunity to make interjections because what I still intend saying may also be regarded as socialistic by him. Whether the NP and the hon member for Turffontein accept it or not, the trouble is that South Africa is worse off politically and economically than it has ever been in its whole history. [Interjections.] Is that a socialist statement? It is a reality. Nobody in his right mind would question that today, and I am unhappy about it; I am not pleased about it—far from it. The reality is also that it does not help me to say that it is the policies of the past that have got us into this mess because that does not solve anything. What we have to do is to decide on how in fact we are going to try to put the thing right. That is where I should like to make my suggestions.

I will start off with the first one, and we can then see whether this is a socialist measure. We asked and we pleaded that this House should appoint a committee in order to review all legislation so as to remove from it all provisions which were discriminatory on the grounds of race or colour. We asked for it; we pleaded for it. I must say that the failure to appoint such a committee is an opportunity lost to show both South Africa and the world that apartheid is going and that there are serious efforts being made to remove it. I want to point out that that is one of the first essentials and it is the first of the points I want to make—the first of five that I think are essential as to what we have to do.

The second point I want to make—and I will head it with a simple statement—is that revolutionaries do not want negotiation. I think the reality is that we have to agree in South Africa to talk to leadership of all sections of the people about the future of South Africa. There is no need for agendas; there is no need for preconditions on anyone’s part; there is no need to stipulate non-negotiables in advance. Once we start talking it may be well be found that the agendas virtually write themselves and that there is much more in common between South Africans than people believe at the moment, because talking can develop into negotiation. But if there is no talking, how will we ever get negotiation in South Africa?

The third point I want to make is that steps must be taken in order to, what I call, enable the centre to hold, and not only for the centre to hold, the centre of South African politics, but for the centre of South African politics to advance and become a meaningful united force of all people of all races, colours and language groups to deal with the extremists from the left and the right.

I am not referring to moderates in that sense of the word, because those centralists with free world philosophies should not to my mind be moderate in the peaceful advocacy of their centrist cause. That is part of the problem with moderates; they are moderate about everything. In fact, moderates should be determined in the cause they advocate. If there cannot be freedom of expression of centrist views whether in the Black, Coloured, Indian or White communities, either because of physical fear or psychological pressure, then the centre of South African politics will already have lost the first round. I believe that the survival and the unity of the centre of the body politic in South Africa is vital for any kind of South Africa which will have a future.

A fourth point which I want to make is the following. I again make the appeal that there has to be a formula in terms of which, within the resources of the economy, a realistic plan can be announced to remove discrimination from the provision of social services— a plan which will of course demonstrate our bona fides in this regard. That formula is essential and it needs to be announced as soon as possible so that we can make it clear that within our resources that will be done within a specified period of time.

The fifth point I want to make, Sir, is in relation to what I should like to call employment in order to improve the quality of life; in other words, an operation in South Africa in which we will quite clearly seek to create massive employment opportunities in order to solve two problems. The first of those is to improve the quality of life of people, and the second is to provide jobs for people. I have never been quite certain whether those who make or execute policy have correctly identified the problems. They, like all of us, are subject to the constraints of history, or subject to the pressures of political expediency—some of us; not all of us in this respect—and are also subject to the lobbyists of self-interest groups in South Africa.

In recent times, however, Sir, one gets the feeling that at least in some of the circles where power rests in South Africa there is an appreciation of the realities of the economic problems which face us. The linkage of politics and economics has, since the overseas bank problems, been accepted. In this regard I can quote, for example, what was said by a gentleman who is a member of the security police, who recently made it very clear, in an article he wrote in Leadership, what the objectives of the revolutionaries were in regard to the exploitation of economic unrest and economic grievances, and how those were being exploited to further the cause of the revolutionary.

The vast gulfs in the quality of life in the majority of areas occupied by the different population groups are slowly being recognised; and there is an urgent need in our time for something to be done about this. Something has been done in some respects. Unfortunately, however, not enough has been done; and what has been done has not been effective enough.

Moreover, the income gaps between the population groups as a result of historic privilege and backlogs in education and training are such that we cannot leave them as they are.

The most important problem of all is the massive unemployment which is increasing as a result of the pressure being exerted by the increase in both the population generally and the economically active population. This problem cannot be left unattended to. Dramatic action must be taken, for the problem is directly linked to unrest and instability. Moreover, with the ever-increasing politicisation of social and economic issues and with the unrest continuing, the possibility of finding generally accepted political solutions is, in fact, receding.

To solve the economic problems we need someone of courage, someone who will get up and launch a programme of such magnitude that it captures the imagination of the country. That is the appeal I make to the Government today—to capture the imagination of the country by addressing the root of the problem.

South Africa did this in the 1930s when we had a so-called “poor White” problem. Pres Roosevelt showed it could be done when he dealt with the vast unemployment in the United States in the 1930s.

The answer does not lie in patchwork and in gestures. Neither does it lie in kindnesses and in charity. They can help with the problem, but they are not the solution to it. This is why we need to get what some people have called “the locomotive of growth”. We need to get steam up and we need to get the economy going. Moreover, this needs to be done with the minimum inflationary effect and with the least harm to the balance of payments.

Growth can stem from either the private or the public sector. Undoubtedly one would prefer private sector growth in the right activities. Somehow we just have to get steam up and deal with this issue; and I believe the Government should make the necessary start.

I therefore appeal for the launch of Operation Employment to Improve the Quality of Life. This involves a massive programme of building houses, schools, roads, parks, clinics, recreation centres, dams and irrigation works and service activities.

The recruitment of the jobless to do the work and the training of those who do not have the skills to do it is being done now on a small scale but it is not being done on a sufficiently large scale. The State will have to find and invest large sums of money in order to get the scheme going, and I believe that money is available.

Time is running out and the reality is that we employ today fewer people in jobs than we did three years ago. In another five years from now there will be another million jobseekers whom we have to find jobs for. During the past 10 years employment has in fact increased by no more than 1% per annum whereas the population has increased by more than 2½% per annum. It is a problem which, unless one deals with it, is going to result in a complete breakdown of the structure that exists in South Africa.

If we created such a mass work-creation programme there will be many advantages. The creation of jobs would make the restoration of stability much easier. The products used in the projects envisaged are virtually entirely of South African manufacture and origin. This will mean that underutilised capacity will be taken up, there will be new confidence for investment to supply the materials required, and more private sector jobs will be created.

The workers both in the projects and in the revitalised private sector will have money to spend, and so increase demand. It will be a demand for what lower income groups need, namely food, clothing, household goods and housing—all again articles of South African manufacture. In this way a spiral of growth and employment can be created.

This is what one asks for—that there should be this great impetus which is created as a result of a large, imaginative, work-creation programme.

A side effect of this programme will also be that there will be work for white-collar workers. That in turn will help to reduce the frustration level which exists in many educated people who thought life would be different with an education but who have found that, if anything, life as an unemployed person is worse once one has been educated than for an uneducated person.

One can therefore do various things: One can create jobs, revitalise the economy, reduce the frustration level and improve the quality of life. One can do all of these if one is prepared to show courage in relation to this particular project and in relation to these matters.

May I, in appealing to have this programme created, this whole new concept of deciding that a massive programme should be initiated in South Africa, say that that is the only way in which one will restore stability in South Africa. It does not help if we only increase the amount of money that is spent on security. This is the kind of security that is needed because if one gives jobs and homes to people and allows them to buy the products of society, they will not be found throwing stones in the streets. If the numbers of unemployed in South Africa increase, however, one is making the task of the security forces to contain unrest an almost impossible one. It is not a practical proposition. One has to do something about the ever-increasing unemployment in South Africa.

May I turn briefly to a number of other aspects of the Budget with which I would like to deal. The first of these is a matter that lies close to my heart. It is the issue of pensions for Second World War veterans. I want to appeal in particular for the Black ex-servicemen of World War II. It seems that they are today being accused most wrongly. Let me quote:

How does one justify discrimination on the grounds of colour in respect of the veterans of World War II? I would like to make the appeal that those discriminatory measures should be removed from our Statute Book.

There are two other matters I feel I should touch on, as I consider them important. The first is the new Vote in the office of the State President which is, I think, the responsibility of the hon the Deputy Minister of Information. I am not sure what his correct title is as it keeps changing. I am referring to the Bureau for Information. When I read the aim of this bureau, I thought it had a very laudable object, namely “to foster a positive attitude towards the RSA”. I think the hon the Minister of Constitutional Development and Planning—who is smiling—would agree with me that that is a laudable object. He would support it, would he not? [Interjections.] He has doubts. I suddenly found to my horror that this was not the function of the hon the Deputy Minister. His function keeps changing, and the latest change was today. I may still be out of date because it may have changed again since then. His present function is “to promote effective communication between the Government and the population of the Republic of South Africa”. When evidence was being given, we heard that the purpose of the bureau was really to enable the people of South Africa to understand Government policy. That is the evidence that was given. [Interjections.] I can forgive them for not understanding it, but I cannot forgive the hon the Deputy Minister for wanting to abandon this laudable object of improving our image in order to turn his department into a propaganda machine.

According to the Budget in front of us, we are going to be asked to vote money in order to improve the image of South Africa. If the hon the Deputy Minister wants to amend this provision, he will find that we and many other hon members will be opposed to amending it in order to convert it into what we call a propaganda machine.

Let me conclude by just touching on what might be regarded as two minor matters but which are in fact very important. Firstly, I want to deal with the question of the regional services levy. All the talk of tax concessions and all the talk of a lower level of tax and an incentive to work will be destroyed if, later this year, the regional services levy is introduced in the form in which it is intended to introduce it. No one is going to argue about the fact that there needs to be an improvement in the services of local authorities and no one is going to argue about the fact that there needs to be an upliftment of depressed urban areas in South Africa.

We can argue about the composition of the boards—that is another matter—but we do object to the nature of the tax. Turnover is not necessarily related to profit, and to have an employment tax at this time when one is trying to encourage employment seems to me to be the utter height of folly in South Africa. Even at this eleventh hour I want to say that rather than create this new bureaucratic machinery in order to collect this tax and rather than give the additional work to businesses in order to pay the tax, we should look at this whole thing again. Let the Margo Commission deal with it and present a far more effective way of dealing with this matter.

I want to end by saying one last word. If we do not put our house in order insofar as South Africa’s economy is concerned, it is not going to help to draw up fancy constitutions. Whatever the constitutional dispensation of South Africa is, it has to rest on a sound economic base. Unless we create that sound economic base, unless we take the people off the streets and back to work, unless we improve the quality of life of people and unless we give them hope for the future, the constitutional structures, whatever they may be, will not work. That is why I find myself so disappointed in the Budget. This Budget is designed as if we are living in normal times, when the reality is that we are living in a time of crisis. That is where this Budget fails to address itself to the problems.

Mr Speaker, I thank the hon member for his amiable words and also wish to have my thanks and appreciation towards the hon member recorded. He contributes very well as the Deputy Chairman of the Standing Committee on Finance and I receive good co-operation from him. I also wish to express my thanks and appreciation for the hearty co-operation I receive from the hon members of the committee. The fine attitude and the mutual confidence we built up last year could be expanded further this year. That is why we were able to make further progress this year and attempt creating a pattern to which fruitful addition could be made in future. We regard the procedure as advantageous to the budgeting process and are grateful for the high level of the discussions. I am convinced it will be possible to derive much benefit from this system. By noting memorandums submitted, evidence given before the committee, questions put by hon members of the committee and their public proving ought to enable all involved to arrive at a better understanding of the Budget.

In terms of Joint Rule 43 the committee heard evidence and consulted on the Appropriation Bill for seven days. The committee heard evidence from 10 heads of Government departments and their officials as regards their Votes and their respective programmes. We wish to express our exceptional thanks and appreciation to the hon the Ministers of Finance, of Foreign Affairs, of Manpower and of Trade and Industry who participated in these discussions. It was a privilege and an honour to be able to have them there. We wish to express the hope that each hon Minister will appear before the committee with his department from next year. We also wish to express our thanks and appreciation to the officials for their valuable services. Our grateful thanks also for the valuable services of the Secretariat, especially of Mr Ferreira. Without their assistance and support matters would not have gone so smoothly.

The committee was disappointed, however, that departments—obviously through misunderstanding—did not comply with the request put to them by the committee last year to supply the printed appropriation accompanied by memorandums of expenditure explaining reasons for modifications to the programmes and expenditure. We hope that in future these memorandums will be made available together with the Main Appropriation as this will promote an even more significant discussion.

The committee was also grateful and gratified to receive written submissions from the public and four of those concerned were heard. We hope these discussions with the private sector will also be further extended in future.

The report of the committee was tabled and the evidence given was recorded and will appear in printed form. We hope hon members will find it useful and informative.

I expressed my surprise last year that chief spokesmen of parties had already commented on the Budget Speech on the day and the evening it was made before we had had the seven days of consultation. My standpoint is and naturally remains that a person can comment further only after evidence has been heard. It would be unprecedented of members of a committee or a commission with terms of reference to conduct an inquiry, for example the Margo Commission, to comment before they had heard evidence. It is a pity that some of us are sometimes inclined to play party-political games. When that happens, we find that party politics are often placed above the interests of the people of our country as I shall attempt to indicate to members in a short while. Nevertheless I shall leave the matter at that.

If one studies the Spectrum section of The Argus of 18 March 1986, it is interesting to see in what company the hon member for Yeoville finds himself when he wishes to play party-political games. I shall quote inter alia the hon member’s comment as it appeared as follows:

That is precisely what the hon member said here this afternoon. To my mind the seven days’ questioning was reasonably futile in the light of the hon member’s remarks before we went into committee.

I found other people’s comment on the same page of The Argus. The comments of Mr Murphy Marobo, the UDF publicity secretary, were reported as follows:

Secondly, I quote Mr Muntu Myeza, the publicity secretary of the Azanian People’s Organisation, as follows:

Thirdly, the comments of Sister Ncube, President of the Federation of Transvaal Women, were reported as follows:

It is very interesting that there was such a furore over the increase in the bread price which is not to take place after all. Smart alecks are caught out in this way if they always want to be in the van. The arrangement with the Wheat Board was made long before so that the bread price did not need to be increased. I accept the hon member is not eager to be associated with these institutions but it proves one should be very cautious not to become an advocate for other persons by merely wanting to play party-political games.

On 18 March 1986 The Argus reported with justification in bold type on its front page:

We heard this from the hon member again this afternoon and I believe we shall hear it yet again from other Opposition members.

I am aware that Opposition parties are predictably disparaging. Nevertheless on the Monday evening after the Budget I listened in surprise to one spokesman after the other of the Opposition parties branding the Budget as unimaginative. Do hon members understand this? An unimaginative budget! I shall revert to this in a moment and show hon members that it is anything but an unimaginative budget.

What did the Business Times of 23 March 1986 have to say about the Budget? I quote:

How does that sound in comparison with the amendment the hon member read to us here this afternoon? [Interjections.] Does this sound like an unimaginative budget? Oh no, those were hollow, meaningless words.

The hon the Minister of Finance is to be congratulated on accomplishing the improbable by submitting a brilliant budget in these difficult times—something few people expected. Time does not permit me to enlarge on this but prior to 17 March 1986 countless prophets of doom explained for instance how the deficit before borrowing would be considerably higher than last year and that there would be a reasonably real increase in Government expenditure. “Huge State spending rules out major cuts in taxation” and “Barend in a strait jacket,” was said there.

Amid tight economic conditions and demands by national security, the hon the Minister of Finance appropriated billions of rands in order—as he put it himself—to pursue an imaginative upliftment action for at least the next three years aimed at promoting employment creation and increasing the skills, employment capabilities and quality of life of our people and communities. Now more than ever we have a budget directed at the needs of the people of our country. The way in which this Budget fulfils this is an achievement in the light of the exceptionally difficult circumstances the country is experiencing.

The taxpayer was granted relief over a wide spectrum in the Budget; the hon the Minister even succeeded in distributing a considerable number of gifts and almost no blows. It is an achievement for the hon the Minister and his officials as well as proof of the inherent strength of the economy that so much tax relief could be afforded. This was not done merely out of generosity but in a calculated effort to place the country and its economy on the road to recovery.

The opinion of economists, businessmen and organised trade and industry is that the Budget will stimulate the economy moderately, that it ought to have a positive effect on business and consumer confidence and should be very popular with the majority of taxpayers. Assocom was amongst those speaking in support of its moderate stimulation of the economy. The hon member did not mention this. He quoted only the last part of the statement in which it was said that insufficient was being done to curb inflation.

The South African Federated Chamber of Industries said it was a popular Budget in which there was limited room for movement to decrease personal taxation and in so doing counter inflation through taxation. The group economist of the Standard Bank said the purpose of the Budget was to boost economic recovery and to restore confidence in general. The Life Offices Association said that it would have a moderately expansionary effect on the economy and welcomed provision made for employment creation and training.

What is of importance is that the Director of the Consumer Council said he welcomed the adjustments in the income tax system, the concessions in the sphere of housing and education, the improvement of pensions and the attention devoted to the needs of the handicapped. I can continue quoting examples of positive reaction to the Budget but I do not even consider this necessary.

A critical, thorough analysis causes one to realise the First World economy of South Africa has never before been harnessed so drastically in an effort to involve the Third World component. [Interjections.] The dastardly propaganda now been disseminated that the Budget is doing nothing for the poorest part of the population is simply untrue. Consequently I wish to state it unequivocally that the Government’s approach in this Budget is to improve the social and economic conditions of those in the lower-income groups as well as of the unemployed and old people. Further, the Government envisages reducing the inequality as regards social services to the respective population groups. I shall quote proofs in this regard later in my speech.

How the hon member for Yeoville, the UDF and the Azanian People’s Organisation can say:

truly passes my understanding. A record amount of R6 billion is to be spent on education which represents an increase of 19,3%—the largest single allocation in the Budget. R650 million is to be applied for housing which represents an increase of 25,4%. There is R311 million for Black housing; R2 799 million for health; R1 933 million for the promotion of welfare; R1 129 million for civil pensions and R1 077 million for the improvement of conditions of service. What an outstanding record this is! These amounts, still to be supplemented by other appropriations directed at socio-economic upliftment, like the amounts for employment creation and for the improvement of the standard of living of communities lagging behind, indicate the Government’s determination to stem a revolutionary onslaught, an onslaught which inter alia is based on the exploitation of economic grievances.

Nevertheless this revolutionary onslaught will also come up against the security services of the country for which similar large amounts are being appropriated. The appropriation for Defence reaches a record amount of R5,2 billion and R1 129 million is being appropriated for the Vote: Police. However regrettable, the necessity for these types of services cannot be denied.

The hon member for Yeoville attempted to prove that no concessions came for low-wage groups. Before dealing briefly with the most important taxation proposals, I wish to point out to the hon member and other hon members that as early as last year steps were taken to furnish relief to people in the income group of below R12 000 per annum by raising tax thresholds appreciably. In addition the income segments for categories in excess of R12 000 per annum were also lowered last year.

This year’s most important taxation proposals are the following: The 7% surcharge on income tax is being abolished. The hon member for Yeoville denigrated this on the grounds that the State President had announced it long before. It remains a fact that it is being abolished. A further 5% discount is also being instituted on income tax. Maximum marginal scales are therefore being decreased from 53,5% to 47,5%—a reduction of 6%. I regard this as considerable.

Secondly, the tax-free portion of a working woman’s income is to be increased from R1 600 to 20% of her earnings or a minimum of R1 800. That is a very great concession, so much so that a married couple with two children and the husband with earnings of R25 000 and the wife R15 000 will now pay R1 680—in other words 16,5%—less tax. It is important to note that this concession is of a retrospective nature so that it applies to the year of assessment ended 28 February 1986—therefore to the year already past.

Mr Speaker, you are aware that I have appealed for years for the phasing out of estate duty in its current form especially in consequence of the enormous increase in the value of property, land and stock. As a result we welcome the proposal that deductions be doubled and scales adjusted to such an extent that the maximum rate of 35% will be reached only when the taxable value of an estate amounts to more than R800 000 instead of the current R400 000.

At present agricultural conditions look more promising than in any of the preceding few years. The influence of agriculture on the South African economy remains important. In addition it would appear that the business cycle is currently forging upwards and that this is supported by greater and better exports and a higher gold price. Further, the economic policy is aimed at supporting economic growth. In consequence growth prospects are considerably rosier this year than in 1985. In conjunction with the lower interest rate, the lower growth in the money supply, the large surplus in the balance of payments current account, the stronger exchange rate of the rand, prospects that company profits may appear better in many sectors in 1986 and with such an outstanding Budget as we have dealt with here, it is clear why a very much greater degree of optimism is recognisable at present. I therefore support the Bill with acclamation.

Mr Speaker, I shall revert to the hon member for Smithfield’s speech in the course of mine, but in opening I move as a further amendment:

1. (1) restore law and order;
2. (2) not implement power-sharing with Blacks before a mandate has been obtained by way of a general election for members of the House of Assembly;
3. (3) combat inflation and price increases effectively and will prevent the citizens of the country from being further impoverished;
4. (4) reconsider the drastic cut in the appropriation in respect of the agricultural community;
5. (5) discontinue the inequitable redistribution of income; and
6. (6) restore White job security as a matter of the highest priority.”.

I should like to tell the hon member for Smithfield that this Budget is a beautiful, glittering, political budget with a view to a referendum later this year but it is corrupt in financial and economic spheres. The total redistribution of income continues in it. The CP says stop this; do not merely redistribute income; a man should earn his money. [Interjections.] I find this Budget proof that the Government does not know where it is heading—for socialism or whatever—I do not know. All I can see is that it is on the brink of collapse. [Interjections.]

I wish to tell the hon member for Smithfield that the people quoted by him as praising the Budget are those holding monopolies, that is big business. They shine in this; they really glitter. The so-called 7% rebate is a drop in the bucket as the hon member for Yeoville indicated. I shall return to that later. This Budget illustrates Government hatred of the farming community. [Interjections.] Oh yes, just think about this: All receive money but that of the farmers has been reduced and scaled down.

Let us examine the Budget. I wish to quote a number of figures today. The following amounts have been appropriated for the House of Assembly, the House of Representatives and the House of Delegates: R4 498 million for the White House of Assembly, R1,659 million for the Coloureds and R668 million for the Indians. This means Whites receive 65,9%, Coloureds 24,3% and Indians 9,8% of this amount of R6 826 million. Let us look, however, at how much these three populations groups pay in direct taxation. According to the statistics of that department, Whites paid R4,387 million altogether in 1984 which amounted to 95% of direct taxation. Nevertheless they are to receive only 65% in exchange for this. Coloureds paid R110,9 million but receive a total of R1 659 million in exchange. Does that not represent a redistribution of income? Is that not robbing the White of his possessions? [Interjections.] Yes, Mr Speaker, the hon member for Randburg always laughs; he even laughs at death so he can shriek with laughter again! [Interjections.] Indians paid R118,9 million which amounts to 2,6% of total direct taxation.

Let us take the matter further, however, Sir. Assistance granted to Blacks in this year’s Budget is concealed here and there in the respective Votes—in eight or nine places altogether. If we examine Vote 5—“Constitutional Development and Planning”—we see under programme 5—“Community Development”—that an amount of R13,789 million in toto is intended for this purpose. I am pleased to see the hon the Minister of Constitutional Development and Planning is present in the House this afternoon. I want him to hear what I have to say. In programme 6—“Housing Aid”—an amount of R66,463 million is appropriated and under “Local Authorities” an amount of R352,272 for a similar purpose while an amount of R373,99 million is being appropriated for the programme “Social Welfare” and R133 000 for “Traditional Tribal Authority”.

Then we arrive at the Vote of the hon the Minister of Foreign Affairs. We note an appropriation of R1 092,426 million in programme 3—“Foreign Aid and Development Co-operation”. As regards Vote 10—“Public Works and Land Affairs” … [Interjections.]

It is actually a good thing, Sir, that all these matters are sniffed out as they are concealed everywhere.

“Oom Jan Snuffelaar!” [Interjections.]

An amount of R9,52 million has been set aside for the acquisition of land for the evacuation of non-Whites, while in programme 5—“Technical and Vocational Education”—an amount of R725 Thousand is appropriated.

What do we note when we examine Vote 11—“Development Aid”? It is clearly stated that the objective here is the stimulation of the development of the respective Black population components to the acquisition of self-determination. What is this Government doing, Mr Speaker? When those Black states receive their independence, their inhabitants are granted dual citizenship in the Republic of South Africa. An amount of altogether R2 196,611 million is being appropriated for that Vote.

Nevertheless aid to Blacks does not end there, Sir. No, it goes even further. [Interjections.] Let us examine Vote 12—“Education and Training”. The total amount to be voted here is R1 157,831 million which is an increase of R236,896 million—a rise of 26,2%.

Should we stop this, “Oom Jan”?

I shall now refer to Vote 21—“Finance”. This is the point where I wish to get to the hon the Minister of Finance. The sum to be appropriated here as regards foreign transfer payments for economic and financial agreements amounts to R42,7 million. An amount of R282,7 million is appropriated for the Development Bank of Southern Africa. Then, as regards auditing, there is no provision for the personnel seconded to the Governments of Transkei, Bophuthatswana, Venda and Ciskei from the Department of Finance. No provision is even made for this; it is obviously still included in the last amount. In adding the amounts represented by these six Votes, it works out that Blacks receive R5 589,160 million.

Now we ask what the Whites receive in the process which also brings me to the State President’s Vote. The purpose of the money appropriated for his Vote is to enable the State President to fulfil his constitutional and other functions. An amount of R11,7 million is intended for this, added to which there is an amount of R19 000 as a salary payment to the former State President as well as R73 000 as a salary payment to the former Vice State President. Sir, I wonder what a Deputy Vice State President’s salary would have been! [Interjections.] In addition to the State President’s salary of R109 000, the amount runs into R11,9 million in toto. Included in this R11,9 million is an amount of R4,78 million for the activities of the President’s Council. What is the function of this President’s Council? According to the programme in front of me, it is to advise the State President. An ordinary legal firm in a country town could give the State President better advice than that entire mass of members of the President’s Council. [Interjections.] In addition it costs the State almost R5 million. [Interjections.]

To cap it all, the State President has a staff of 225 people whereas the entire Parliament has a staff of only 240. [Interjections.] Let us proceed to the rest, however. Let us examine the Bureau for Information. The hon the Deputy Minister of Information is not present; incidentally, he does not attend this House any more—he may appear here once or twice every three of four weeks. [Interjections.]

The appropriation for the Bureau for Information is R28,849 million this year, which is R16,074 million or 125,82% more than that of last year. As the hon member for Yeoville said, all this is done to influence attitudes towards the RSA positively. [Interjections.] This is purely an NP propaganda machine.

Goebbels.

The other day newspapers were simply paid R300 000. This is not Government policy and can be paid only when it is approved legally by this Parliament. [Interjections.]

Order! Does the hon member wish to put a question?

No thank you, Sir.

Mr Speaker, on a point of order: Is the hon member for Rissik permitted to say we are acting like Goebbels? [Interjections.]

Order! Did the hon member for Rissik say that?

No, Mr Speaker, I did not say that.

Somebody said it.

Order! The hon member for Sunnyside may proceed.

Money may be spent only in terms of an Act of Parliament, for instance in terms of the Unemployment Insurance Act or the Workmen’s Compensation Act. It cannot be spent on NP propaganda, however, because to my mind that would verge on theft. I actually objected to this in the past. The State may not use its finance to keep party machinery running. [Interjections.]

In addition it is actually the purpose of programme 2 to:

An amount of R15,869 million is being appropriated for this.

The hon the Deputy Minister of Information has 598 members of staff. [Interjections.] That is 358 more than Parliament has! Only one Deputy Minister handles 358 more members of staff than Parliament does; it is actually 133 more than Parliament and the State President have together.

I now wish to draw attention to the Budget as regards the HSRC. This year an amount of R47,661 million is being appropriated as regards the HSRC which is approximately R6,5 million or 16% higher than last year’s appropriation. Surely this council has not been concerned with scientific research recently. Really, the council jumps about—almost as the NP is jumping about nowadays with its policy of a hop, a skip and a jump. [Interjections.] It was established, for instance, that the whole of Pretoria was against mixed marriages but immediately afterwards the HSRC issued a beautiful report indicating that people were in favour of mixed marriages—the exact opposite of the previous findings. I say the HSRC is squandering the money of the country. There are able men among them, brilliant people of great brainpower. I say it would be preferable to dissolve that council so that those people could be put to better use in the interest of South Africa.

Let us pause for a moment at State finance. According to these figures, interest charges to the State for its debt amount to almost R6 billion. Apparently R768 million attached to costs for taking up loans is to be subtracted from this but to my mind an interest burden of almost R6 billion is shocking. Surely the costs of a person’s debt are one’s interest. I honestly think this debt is flagrant and I believe the hon the Minister will agree with me. We cannot survive if matters continue like this. We are grateful that the hon the Minister sent officials overseas to solve problems for us. Let us look at what Finansies en Tegniek of 28 March 1986 has to say. The report is headed in bold type:

I shall now quote a passage further in the report:

What is this actually? These people know something. Are we being sold out further politically? What is going on? This matter has been postponed for three months so that further discussions may be held next year before they present their demands.

Let us look at direct taxation collected in this country. Altogether R1 823 million was collected from gold mines, diamond mines and all other mines together. From the individual as such, however, R7 274 million was collected whereas the other normal companies—that is commercial companies which manufacture and so on—paid only R3 757 million in direct tax. If we look at individuals, we see they paid 56,4% jointly whereas all companies collectively paid 43% so surely we can understand why companies are praising the Government for this Budget. We saw what happened during the referendum; all said they supported the Government in the referendum. If I did not have to pay tax, I would have supported the Government too. We see companies are granted great concessions but the individual is not so fortunate.

As I have said, during the 1984-85 financial year Whites paid 95% of direct taxation, Coloureds 2,6% and Indians 2,5%. I think it a crying shame that Whites are exploited and ruined in such a fashion. There are few people today paying less than before but most pay far more than previously. From 1966 to 1970 the average contribution to State revenue by individuals was only 22%; from 1981 to 1985 it was 28,3% and in 1985-86 it was 28,7%. It is going to be 31% for the present financial year! What do companies pay against this? In 1975-76 they paid 26,3% and in 1985-86 16,5%. Now I ask the hon member for Smithfield whether this is right. Is he happy and does he feel satisfied that the Government is sucking and squeezing the Whites dry? [Interjections.]

The Republic of South Africa is an extremely wealthy country. We possess 95% of all the chrome in the world, 86% of all the platinum, 53% of the manganese, 64% of all vanadium and 52% of cobalt. The CP says we should not simply export all these minerals in their raw form; we should first refine them here and then we will fare better. We also have coal, uranium, copper and other minerals of which huge deposits occur in South Africa.

What do the communists say, however? The communists are behind the entire onslaught against South Africa and this Government is unwittingly playing into their hands. Lenin said long ago: “Whoever controls the tip of Africa, controls the world. We want it for communism.” Lenin said that and I say the Government should wake up or the communists will succeed in this.

In January 1986 the consumer price index stood at 20,7% and we heard in February that it had declined to 18%. We forget, however, that in February 1985, with which February 1986 was being compared, the fuel price rose by 40%. Although it therefore appears that the index declined from January to February 1986, it is not the case. Costs did not decrease because the comparative figure for February 1985 was very strongly influenced by the 40% rise in the price of fuel.

What is the plight of our poor farmers today? Their burden of debt increased by 482,6% from 1975 to 1986. Neither is the Government making any further provision for droughts or other disasters; on the contrary, the provision has been reduced. Farmers’ short-term debt increased by 30% per annum from 1980 to 1985 whereas their incomes actually decreased.

My time is running out but I still wish to speak on manufacturing and on the fact that the Government invests so little in the infrastructure of our country. The estimated percentage of State expenditure in 1978 was 65% on current expenditure and 35% on capital investments. In 1980 the corresponding figures were 73% and 27%; in 1982, 86% and 14%; in 1985, 91% on current expenditure and only 9% on investment. We cannot continue like this because, if this persists, employment opportunities will not be created. We also saw utilisation of factory capacity declining from 87,6% in 1982 to 84,2% in 1985.

If we want to survive and provide work for all our people, real action will have to be taken. We cannot merely put our money to current expenditure but will have to provide an infrastructure. The Government will have to stop squandering money on useless things. It will have to maintain law and order so that factories can continue working. In conclusion, I wish to quote from Frontline of March 1986 from the column Frontline Comment. Under the caption “Trying hard is not enough” they say inter alia:

That is what they say. They continue:

That is what radicals are doing; they are chasing the Government which keeps running and making concessions.

The article continues and refers to President Botha. It runs:

This is blatant. The Government is selling out the Whites of this country. In the next paragraph of the article, one finds:

Under the title “The lure of dictatorship” one finds further:

It is being said already that the Government need hold no further elections.

The Cabinet sitting here must surely be the most shortsighted and incapable of the past 75 years as we have never fared as badly as at present. [Interjections.] I have said to the State President before and I repeat: Get rid of that bad Cabinet. The State President knows which road to follow.

Mr Speaker, had it not been that we are really going through serious times in our country, I think we could have taken the statements of the hon member for Sunnyside with a pinch of salt. The hon member really comes up with the most outrageous statements today and I can only say that I am profoundly thankful that the hon member broke away from the NP together with the other hon members of the CP. [Interjections.]

It is just as well that you stayed where you are!

If the hon member for Sunnyside had still been the finance spokesman of this side of the House, I would have hung my head in shame. [Interjections.] If that hon member were ever to become Minister of Finance in this country, then I really do not know where we would hide our faces. [Interjections.]

The hon member makes the statement that the redistribution of income must be stopped. I want to state very clearly to the hon member that if we seek to keep everything in this country for ourselves, we are going to lose everything.

The hon member for Sunnyside and his colleagues are living in a dream world if they think that there are only 5 million Whites in this country and no-one else. I cannot understand it. They argue as if all the wealth of this country—the hon member referred to the mineral wealth in our soil—belong only to the Whites.

The hon member is correct when he says that most of the personal income tax is paid by the Whites, but this can be ascribed to circumstances; it is an historic fact.

Does the hon member want to tell me, a member of the private sector, that I, with my business enterprise, could generate all the wealth without Coloureds, Black people and Indians? Can our country’s mines do it? Now the hon member comes along with the idea that there may not be a redistribution of income in this country. I want to tell this House that when that happens, we can say goodbye to the future of South Africa.

A second point made by the hon member for Sunnyside, is that this country is on the verge of collapse. Is a country on the verge of collapse when the value of its currency could increase by about 36% within 6 months? The hon member ought not to adopt a short-term view of the matter only; he should look at the overall picture.

As far as I am concerned, the most outrageous thing that the hon member said was that this side of the House hated the farming community. My goodness! Half of the hon members are farmers! How, then, can we hate the farming community? The hon the Minister of Finance, together with his hon colleagues who decide on agricultural affairs, go out of their way to do everything in their power to keep the 65 000 farmers of this country on their land. Let us say this to one another today: This side of the House knows that the farming community is the backbone of South Africa and that without them we would not be able to cope. When things are difficult, with droughts and so on, this side of the House will go out of its way to keep those people on their land.

I do not think it is worthwhile devoting any further attention to the hon member for Sunnyside. He and 20 other hon members were with me in the standing committee on finance which considered the budget for seven days. I want to associate myself with the hon member for Yeoville by also saying here today that the hon member for Smithfield is really a good chairman. He is outstanding. In his quiet way he assisted us in reaching consensus on all the matters that formed part of the minutes. I think it is an outstanding report. I think that we hardly ever voted except on one occasion when the hon member for Sunnyside voted against something. For the rest the contribution made by that hon member for Sunnyside was really minimal. The report was finalised with consensus and I think that says a great deal. I tend to agree with the hon member for Yeoville. If ever there was proof that the tricameral Parliament is a success and is working and that it can get people of diverse political viewpoints together and allow them to reach agreement, then it is the success of the activities of this committee which furnishes clear evidence of that. One could not have anything better. I agree with the statement by the hon member for Yeoville that “if there is one thing which does work, it is this committee.”

In its report the committee itself states that it regards the procedure as conducive to the appropriation process and that is grateful for the high level of discussion. I should like to say to the hon the Minister of Finance that I believe this committee will develop into an extremely valuable medium for the hon the Minister, firstly to bring home the realities of the South African economy, and secondly, to outline problem areas and achieve consensus on them.

The hon member for Yeoville said that we had no long-term plan. When one analyses this budget, one can identify four important areas of Government spending. The first is order and stability; we must be able to live in peace in this country if we want to do anything. The second is constitutional development; we must find a way to live in peace with one another in this country. The third is economic development; we must, as far as possible, provide work for everyone. The fourth is social development; we must, as far as possible, ensure a decent living for everyone in this country. Surely that is a longterm plan. How can the hon member for Yeoville say that we do not have a long-term plan if that is precisely what we have.

Against this background it is the Government’s intention—the hon member for Smithfield referred to this—to do everything in its power over the next three years to give a higher priority to the creation of employment, the improvement of skills, the creation of job opportunities and the improvement of the quality of all its people. This, however, the State cannot do on its own. I want to underline that. It must be an economic partnership between the private and public sectors.

Later in the course of this debate there will be political debate, but how on earth can a man like Bishop Tutu go out of his way to discourage people from investing money in this country? I wish to pay tribute to organisations like Mobil and Coca-Cola, that are prepared to invest a great deal of money in South Africa despite the advice of a man like Bishop Tutu.

I welcome the two-pronged approach of the Government in this budget. In the first place, capital expenditure will be evaluated on an ongoing basis by the public sector and will therefore be curtailed as far as possible on a priority basis. In the second instance, current public expenditure will also be limited as far as possible. I want to agree with the hon member for Yeoville—we said this in our report—that we as the committee are concerned about certain labour-intensive departments, such as law and order and foreign affairs. I agree with him and I nevertheless say that I am convinced that that problem can be solved.

South Africa will only be able to persuade the foreign bankers to return to South Africa as investors if we can convince them that we do not really need them. We must in fact be able to assure foreign financiers that we do not need them. To be able to do this, we must impose stringent discipline as far as our capital and current expenditure is concerned.

Why do people want to disinvest in South Africa? There is, of course, political pressure, particularly if it seems that reform may succeed. In most instances their real reasons for disinvestment in fact have to do with business risk. Over the past year or two the world has gained the impression that South Africa is no longer a safe field of investment. We must be able to rectify that mistaken impression.

As far as last year’s budget is concerned, I want to say that I think that the hon the Minister of Finance, apart from the serious problem of inflation, really did succeed in achieving the short-term goal of the 1985 budget. Excessive demand was eliminated, a bigger surplus on the current account was achieved and the downswing of last year was converted into the beginning of a new upswing.

The hon member for Yeoville says that the Budget holds no benefits for the poor man—“there is nothing to smile about”. I should very much like to single out two aspects that I specifically welcome. The hon member for Smithfield referred briefly to the first of these, ie that despite the drop of R50 million in the bread subsidy, the Government has provisionally found it possible to keep the bread price at its previous level. I think that this is really an exceptional achievement. In the second instance the hon the Minister was able to comply with urgent representations from various quarters to abolish the 10% surcharge on books.

As far as the bread subsidy is concerned, the grave misconception prevails among the public—and I think in the Press as well— that the bread subsidy is a subsidy for the wheat farmer. This is by no means the case, nor has it ever been so in the past. The R200 million of last year’s budget and the R150 million of this year’s budget do not accrue to the wheat farmers. It is there to make the staple food of this country available to the consumer as cheaply as possible. What is the effect of this? The effect is that that staple food can be put on the plate of everyone in this country, rich and poor, at 50c per loaf, and that he can live on it as well as he can.

The problem is just that if any component of that price changes—be it the wheat price, the cost of the middleman or the subsidy— then that price goes up. In this instance the subsidy has now dropped by R50 million. I think that if ever there was a good example of co-operation between the public sector and the private sector it is to be found here, where the wheat farmer, through the wheat board, contributed R15 million and the middleman R10 million. Owing to the profits on the importation of wheat, another R20 million will be contributed. Therefore the hon the Minister of Finance has in fact ultimately succeeded in keeping the bread price constant.

I just want to say to the hon the Minister that according to the majority recommendation of the Davin report on food subsidies, the full subsidy should be abolished on 1 October 1986. I infer from the Budget that the minority recommendation of the report, viz that the subsidy should be phased out in due course, has been provisionally accepted. The fact is that if bread were no longer subsidised at all and the price were to increase by 15 cents there would have been serious problems in our country. We shall have to accept—and there are many farmers in this House—that South Africa is not the ideal agricultural country. Our soil and our climate are not the best in the world. Our input costs are among the highest in the world and I am grateful that the hon the Minister is going to investigate this matter.

If we cannot control the middle man then I want to convey the warning to the Minister today that we shall eventually have to pay an astronomical price for our staple foodstuff in this country.

I want to deal briefly with a second aspect, viz the abolition of the surcharge on books. I should like to bring it to the attention of the hon the Minister that there is tremendous appreciation for the announcement of the abolition of the surcharge on books. I fear, however, that this is only the tip of the iceberg, because this has now focussed attention on the influence of tax on books in general. Tax on books is in reality nothing but tax on education. Books are the bearers of knowledge and culture. They offer information, recreation and pleasure to many who are unable to obtain these things in any other way. Research has shown that tax on books can cause serious harm to both formal and informal training. It threatens the standard of literacy and deprives millions of the opportunity to develop further. I think it is of the utmost importance for the development of our country, with its heterogeneous community, that books be as accessible as possible to meet all the complex and diverse needs of our country.

Mr Speaker, you may now say that this does apply in regard to educational books but not to the others. The fact is, however, that even the simplest book can be of educational value to someone. Reading stimulates curiosity, and that in turn leads to the acquisition of knowledge.

Does that include Bibles?

Of course that includes Bibles.

The abolition of the surcharge on books as such has already been of great psychological value. I want to reassure the hon the Minister here and now by saying that I am very much aware of his problems, and I am the last to want to erode his tax base. We who live in this country, with its developed and undeveloped sectors, will however have to think revolutionarily and use every resource to uplift our people. This, then, is a longterm plan for the hon member for Yeoville.

Then, however, I want to come a little closer to home. One cannot but be concerned about the future of the Afrikaans books. I come from Paarl, where Afrikaans originated, and where the first Afrikaans book was printed more than 100 years ago. However, what becomes of one’s language and culture if the printed word is no longer available? Look at what happened in Argentinia, for example. The other day there was a fine television programme about the Afrikaners in Argentinia. They no longer have Afrikaans books. Accordingly the Afrikaans language will have died out there within 25 years. The same applies to the Bantu language, the Black languages and the Black cultures of South Africa. I think we must do all we can to make it possible for the printed book to be more cheaply and more readily available.

The State has now done a wonderful thing by giving books to Black people free of charge. This means that the State is going to be by far the biggest purchaser of books in the country. If we can reduce those prices then that will mean more and better books at a lower cost to education. It will represent an investment by the State in the future of this fine country of ours.

Unfortunately it is specifically the lower income groups that are hardest hit by high prices. It is those very people that we should reach with the printed word.

Overseas this matter is dealt with on an entirely different basis. In Ireland one pays no tax on books. In Europe—France, Holland and Germany—one pays 12% less tax on books than on other commodities.

I want to conclude by saying that it must be possible for the book, the bearer of knowledge, to be a precious companion to everyone, old and young, rich and poor, so that progress may be stimulated in our beautiful country and so that it can be associated with understanding, insight and appreciation of one another’s standpoints. Otherwise we shall never understand, appreciate and respect one another.

Finally I want to say that I believe that the hon the Minister deserves our praise and gratitude for a very balanced Budget which has and means something for everyone in this country and which will, in particular, be capable of ensuring a fine future for South Africa as a whole.

Mr Speaker, in response to a comment made by the hon member for Yeoville about having something to smile about, the hon member for Paarl indicated that it had not been necessary to increase the bread price as a consequence of the R50 million reduction in the bread subsidy. He also commented on the removal of the 10% surcharge on import duty on books. I think it is a bit of a cheek to give the Government the credit for what the farmers themselves have decided to do in respect of the R50 million. They—and not the Government—are the ones who have sacrificed the R50 million and I therefore fail to see how that is something the Budget can make people smile about.

So far as the 10% surcharge on books is concerned, it does of course make people smile a little because it does help. However, it is a surcharge which should never have been imposed in the first place. Therefore I really cannot appreciate why one should smile when someone who has been bashing the blazes out of you suddenly stops bashing you! [Interjections.] That, then, is the sort of attitude I have towards these issues.

Hon members who have preceded me have analysed the Budget in some depth. According to the interpretation which the hon the Minister himself placed upon his intentions and their opinions as to the hon the Minister’s intentions, Opposition members have clearly indicated that they do not consider this to be a very good Budget.

We will not be moving an amendment. However, for the record, I want to indicate why we cannot support this Budget. The reasons are as follows: Firstly, it does not make any serious attempt to reduce inflation. Secondly, there is still far too much wasteful expenditure on a bloated and wasteful Public Service. Thirdly, too little has been done to create incentives for job creation and general public saving. Fourthly, nothing in this Budget builds up confidence in the financial future of South Africa. Fifthly, there has been no reduction in GST, whereby the benefit of a tax saving might have been given to the poorer sections of our community; and sixthly, we do not believe that this Budget is realistic in that the expenses can be contained in relation to those budgeted for, particularly bearing in mind the 2% that has to be saved.

If the intention behind this Budget was to stimulate business and to create jobs, then I do not believe it will achieve its objective. If, on the other hand, the objective was to make as many people as possible feel that there was something in the Budget for them, then I believe that it has succeeded, regardless of the fact that there is very little real joy in this Budget for anybody. I believe it to be quite a clever piece of prestidigitation. I must congratulate the hon the Minister on convincing many people, including even hard-headed businessmen, that this Budget will assist in solving some of their problems. Personally I do not believe that it will solve any real problems at all, in spite of the apparent concessions because in my opinion it is inadequate for the purposes. However, I am prepared to concede that my opinion is probably no better than the hon the Minister’s or anybody else’s opinion. Diverse opinions were certainly expressed by businessmen. Some said the Budget was good; some said it was bad. However, in the ultimate, I believe all opinions are only calculated guesses.

I believe that to solve our financial problems—everybody accepts the fact that we really do have financial problems—we have to face a few facts. I believe one of the first realities is that we have to share the economic cake in such a way that all groups can see that they are getting a fair share. However, with the size of the economic cake we have in South Africa at present, I quite frankly regard this as impossible. The economic wealth-producing cake is just not big enough. Even it if were practical—which, of course, it is not—to give the whole economic cake to our Black South Africans, then it would still be inadequate to come even close to meeting their expectations. Therefore, if we are to have any future at all, and peace and happiness in this land, then we must set about creating a very much larger cake, designed to meet the needs and aspirations not only of the more exotic groups in South Africa but of the 30 million or 40 million people of the whole of South Africa. Bearing this in mind, and the fact that all the talking in the world will not materially change this particular Budget, I do not propose to indulge in party-politicking or excessive criticism of the Government which can only damage our country internally and externally; that is, of course, if anybody ever took notice of what I say anyhow! [Interjections.]

However, I do intend to present a few thoughts which may be of use in the Budget which is even at this stage being prepared for next year. In the Standing Committee on Finance we were told that, even as we were sitting in the standing committee meeting, they were already preparing next year’s budget. Therefore, as I say, I am not sufficiently naive as to think that anything one says here today will make any difference at all to this Budget. However, if we give a few ideas now for next year, the hon the Minister of Finance may just do something about it.

First of all, all South Africans must gain or regain three things. The first of these is pride in our country and in our South Africanism. When I say this, it does not preclude the love of and pride in our particular group. However, it should be an overriding patriotism for our country. That pride is very much needed in South Africa and I believe all South Africans should be able to feel it.

The second thing I feel is needed is the incentive to work hard, to invest and to take business risks if one is an entrepreneur, and to give of one’s best and to save for the future if one is an ordinary worker or salary earner.

The third thing which I believe is vitally important is to build up the confidence that is needed to impress ali and sundry on the national and international scene that we South Africans are going to get on top of things and become a great and prosperous country where all can live together in peace and harmony without race discrimination. Unfortunately, race discrimination has damaged the confidence situation because much of this racialism has been enshrined in our legislation, and it is vitally important that we get rid of it if we want to build up international confidence.

Let us take a look at these three points— pride in South Africa, incentives in respect of hard work and risk investment, and confidence in the future of our land. Let us assess our problems and give thought to the possible answers.

How many South Africans can really take pride in their country when we are so divided and discontented? Until recently many non-White South Africans did not even have the right to claim citizenship, solely because of their colour. Many think of their tribal affiliation before their South Africanism. I am not only talking about the Zulus and the Xhosa; I am talking about the Afrikaner and the English-speaking people as well, because they also think of themselves first in many instances as being part of that particular tribal group and not as being South Africans first. Unless one thinks in terms of being a South African first one will not have pride in South Africa. I do not believe that this “tribal group first” attitude is conducive to pride in our land.

I am not suggesting that we should forget our group, our origins or our culture, and neither should we be expected to. However, I believe we must allow our broad South Africanism to take precedence over our tribal groupings. All must have equal rights by virtue of being South Africans, not special rights by virtue of their colour or their group. I believe this outlook will build an attitude of belonging which ultimately will engender national pride in the majority of all of our groups. With this pride there will be engendered a self-discipline which will stop South Africans wanting to bomb or burn down their schools or Government buildings and the like. Furthermore, if they have this pride they will stop these other clowns from doing the same thing as well.

Finally, on this particular point, when peace has been achieved, it is vital to build up our commerce, industry and culture because this is how the cake can be enlarged to meet the reasonable expectations of all. However, to build up our gross national product and job opportunities, entrepreneurs and public alike have to be given the right incentives.

I now come to the second point I made in respect of incentive. What is meant by this word in a free enterprise society? To an entrepreneur, as far as I am concerned, it is an opportunity to make a reasonable profit on hard work and risk investment; and to the man in the street, to make a good living, to obtain security for his old age and a chance to get his slice of the free enterprise system by building some capital which will assist him in income generation.

Can these criteria be met in South Africa today? To an extent I suppose they can on paper. Yes, particularly for the South African when he is dealing in rand. However, I do not believe it is possible for this to be so for the international businessmen, neither for that matter for the intelligent or knowledgeable local investor because, due to high taxation and inflation one may be earning more rand, but in terms of purchasing power internally and exchange rates overseas one loses on all South African financial investments. I would like to give an example. If one invests R100 at 15% interest a taxpayer will pay R7,50 of his R15,00 interest in income tax, leaving him with capital plus interest of R107,50. I am referring to him as being subject to a certain tax rate.

47,5%. It is no longer 50%.

Well, I am talking in round figures. The figure may be slightly smaller. With inflation running at 20% the real purchasing power, overseas and in South Africa, would only be R87-50 instead of R107-50. In the United Kingdom, doing the same sort of thing, one can invest tax-free at 10,75%, so one’s return is R110-75. With inflation running at 4% to 5% one has a real growth in one’s money of 5% to 6% on purchasing power. This is very important. This is one of the reasons why people are loath to save. Quite honestly, the sensible thing to do is to borrow up to the hilt, as much as one can possibly lay one’s hands on, and pay back in bad money what one has borrowed by way of good money. Of course, this in itself is totally foreign to all of the concepts of those of us who have been brought up on the basis of pay for what you want, do not borrow too much and so forth. Furthermore, it certainly will not help the inflation situation. In fact, I would imagine that demand-push inflation would be increased, further exacerbating the appalling situation that prevails at the moment.

I believe that if internal finance is to be generated, no interest should be charged on long-term financial investments unless interest exceeds the rate of inflation, which can be scientifically fixed. In other words, if people are making long-term investments but are genuinely not realising real returns then, I repeat, no tax should be charged on that money. In that way people would be encouraged to save.

It may well be that tax revenue will be lost initially. However, over the medium term and the long term that money can be recovered through the creation of jobs for taxable workers. So much money would then become available for investment purposes because the businessmen would be making money—in fact, everybody would be making money—that the inflation rate and interest rates would fall. In other words, normal financial play would establish its own checks and balances.

Finally, I want to talk about confidence. This, I believe, is very sadly lacking in South Africa today. I know and talk to a lot of businessmen in my own sphere of business and I also talk to a lot of other businessmen. Many of them have said that they would get out of the country if they could get their money out. Really, there is very little confidence in the future of this country. Even those who do not think along those lines talk about “hanging on to their money” or of putting their money into hard investments like Krugerrands or diamonds and the like “just in case”. They realise that they may not earn any interest on their money but consider that if they put it into bricks and mortar and build up a business they cannot take it with them if they are kicked out of South Africa or if the situation here becomes intolerable. [Interjections.] This is what the businessmen are saying! I am sorry to have to say it, but it is the truth; and those who do not believe it should start mixing with the businessmen and find out. [Interjections.]

I believe that confidence in the future is being undermined by the international interference of foreign governments and bankers—ostensibly because of our political policies; but I think the real reason can be traced to the problems with their internal policies and to the greed for certain facilities, amenities and minerals that we have in South Africa. I believe we must address this problem and solve our internal differences so that these mealie-mouthed hypocrites cannot hold onto the rope and strangle us. I believe, incidentally, that this rope is one which we ourselves have made and given to them. In my opinion, one way to solve our problem would be to do as we have done with the Natal indaba. We want to illustrate to the world that South Africans can sit down together and discuss a future of powersharing in a civilised manner. We want to show that we do have mutual respect for one another. Moreover, we want to show that we do not need the USA planting its big size 12 boots in our domestic affairs, creating expectations which cannot possibly be met.

If the Government treats this indaba with due respect—should it reach some kind of consensus—we will, I believe, be well on the road towards building up the confidence that will turn this well-endowed land of ours into a land that shows the world how people of diverse cultures can and should live together. I am convinced that if confidence in the future is assured, money, skills and jobs will soon become available on a scale that will meet the needs of our burgeoning population. [Interjections.]

I have already mentioned that we are not moving an amendment. As I have indicated, we have a number of reasons for not supporting this Bill. We will be supporting the amendment moved by the hon member for Yeoville. Regrettably, we cannot support the amendment moved by the hon member for Sunnyside because he appears to have made a mistake. He says that elections should only be held for members of the House of Assembly. He appears to have forgotten that there are also members of Parliament in the House of Delegates and House of Representatives. He also talks of securing only White job security while there are, of course, other people who also do not enjoy job security. Had the hon member referred only to “job security” and “Parliament”, we may have been able to support his amendment as well. [Interjections.] As I have already said, however, we will be supporting the amendment moved by the hon member for Yeoville.

Mr Chairman, the hon member for Umbilo raised a few good arguments here; arguments to which one could listen. In noting a few of the other previous speakers, however, one naturally has to say this is a very good Budget. Criticism up to this point has actually been very superficial.

I should like to start by referring to the hon member for Yeoville who repeated the old story that it was apartheid which cost so much money. As a democrat, however, I now wish to put a question to the hon member for Yeoville. If his party had to apply its policy of a greater and broader democracy, does he contend it would cost less?

Integration is much more expensive!

To my knowledge it is a fact that the more democracy one permits, the higher the attendant costs. I therefore believe the hon member for Yeoville’s argument does not altogether hold water. The second argument put forward by the hon member for Yeoville concerns—according to him—inefficiency in the Public Service—the squandering of money by the Administration. The hon member for Yeoville and I served together on the Standing Committee on Public Accounts and I cannot recall that we actually ever encountered such appalling inefficiency there. [Interjections.] In addition the hon the Minister has appointed a committee to inquire into how the Public Service may be made more efficient.

Mr Chairman, this brings me to the hon member for Sunnyside. He reminds me so much of an incident someone once related to me. I have a friend who was very well acquainted with Pres Tubman of Liberia. He assisted Pres Tubman and his Minister of Finance in certain negotiations with a bank in New York. On conclusion of the negotiations the professor—my friend—asked Pres Tubman where on earth he had come by his Minister of Finance. Pres Tubman looked at him and said: “He is the only one in Liberia who can count.” In looking at the hon member for Sunnyside, I also have to say it appears to me he is the only one in the CP who can count. [Interjections.]

Let us analyse a few of the interesting arguments put forward by the hon member for Sunnyside. He said here …

You have just run out of subject matter!

Oh, Daan, you do not understand a thing about this in any case! [Interjections.] The hon member for Sunnyside said here inter alia that many more employment opportunities should be created. In his next argument, however, he stated that companies were paying a diminishing amount in tax whereas individuals had to pay up increasingly. I merely wish to point out to him that it is companies who create employment opportunities in the Western World today. Where possible one therefore has to encourage companies to do so. In the second place, one always finds during recessionary times that individual personal taxation increases more than company taxation percentagewise. This is because they try to keep people in employment whereas their profits are actually declining. An old argument which is naturally raised regularly in this House—by the hon member for Sasolburg as well—is that Whites are paying all the taxes now; that their tax is applied for Black education and Black health services. Nevertheless these people do not make a study of the truly relevant statistics; they turn up here with distorted figures. I am referring for instance to the figures used by the leader of the hon member for Sasolburg’s party. He used figures but omitted the expenditure of the provincial councils. [Interjections.] It is a fact, however, that the Hochenheimers, the Rothschilds, the Oppenheimers and so on—everyone they wish to obliterate should take note of this—pay the highest tax in South Africa. Together 15% of the Rothschilds, the Hochenheimers and their fellows pay 75% of the income tax of the country.

In drawing a further comparison between sales tax, personal tax, excise duty, estate duty and so on and noting expenditure on education, health, etc, it is very apparent that 80% of our taxpayers do not bear their share of this expenditure. I think that point should really be understood now. To go out and tell people that the Black man is being subsidised to such a great extent is not telling the entire tale. He is being subsidised because he belongs to a lower-income group and Whites from the lower-income group are also assisted.

If one looks at this Budget, an exceptionally good one, there are four aspects which come prominently to the fore. The hon the Minister of Finance’s Budget for the first time presents us with both a political and economic image.

The first pillar on which this Budget rests is the desire to improve the socio-economic position of lower-income groups. This emerges from what is spent on education, health and housing. The time has come for us all to follow the hon the Minister of Finance along the way he has taken. I hope he will have even more money to spend on the lower-income groups of all races in South Africa next year as that is the only way we can obtain stability in this country.

The second pillar on which the Budget rests is the infrastructure which is also related to lower-income groups. This includes the extension of residential areas. The only way in which we can overcome current difficulties is to improve conditions in towns where there is trouble.

The third pillar on which this Budget rests is our security, defence and the Police. In this country with its divergent race and income groups and where we are in the process of an evolution—and some elements even of a revolution—we cannot manage without proper security, safety, stability and order. We thank the Police and the Defence Force for this.

The fourth interesting pillar is the fact that the hon the Minister wishes to prune real State expenditure. Points raised in this regard today were privatisation and deregulation. I should like to mention an interesting possibility to the hon the Minister. Let us examine Escom which is criticised daily by everyone. One cannot privatise Escom itself.

Why not?

One can privatise some of its power stations, however, because if one has a power station with a stable income and its prices have to be adjusted by 80% for inflation, it is an excellent investment for our insurance companies as the income is stable. Having said this, I wish to add that I am concerned to some degree about the lack of risk capital in South Africa. It appears to me that insurance and investment companies are all taking over existing companies and leaving too much to the State in launching undertakings demanding risk capital. Those are the four pillars of State expenditure.

Let us examine the taxation side of the Budget. We can be grateful that there is to be no increase in taxation although the second phase of the tax on fringe benefits becomes operative. There are a few points on which I differ with the hon the Minister but what is important is that we are unafraid to proceed with the second phase of the tax on fringe benefits. Not long ago the monetary policy had hardly any effect on housing and the sale of motor vehicles. One reason we are faced with problems in some of these industries is the overspending in 1983 because the monetary policy was ineffectual. It made no difference how high interest rates soared as “Daddy” could pay because of the fringe benefits he received. The hon the Minister also has the right approach because he has started lowering the higher margins in accordance with the increased income he expects from tax on fringe benefits. He has removed the 7% surcharge and instituted a 5% discount as well. I hope that, as the hon the Minister’s income increases, we shall receive a further reduction next year because that is an equitable decrease; it is not a case of certain groups receiving this benefit and others not. This Budget is not a Keynesian budget—to use this big word. It is not the type of budget some members on the other side want in order to distribute money on a large scale. This Budget is financially cautious; one may use the word “prudence” here— which is why it will succeed.

It is not always realised that this Budget was introduced under enormous financial pressure; under enormous overseas pressure as regards our foreign capital. We are faced with the problem of repaying our foreign debt without having any foreign capital inflow at the moment. This limits our economy.

Inflation hits the man in the street hard; prices rise and he blames the Government. I have a great deal of sympathy for the man in the street because he suffers in consequence of the high inflation rate.

Let us examine the effect of the increase in the prices of imports. In May 1984 this was 3,5%; in June 1985, 24,5% and in December 1985, 30,7%. This is what we are faced with and the Government can do very little about it fundamentally.

There is something which is of concern to me and that is the enormous increase in the price of medicine; I know this affects our people. I have heard that certain of our pharmaceutical companies controlled from overseas have been placed under enormous pressure by their parent companies as regards the demands of trade unions. The problem is that these people—who actually hail from one country in particular—ultimately capitulate to the pressure and agree to salary and wage increases. This upsets people because those increases are passed on in the prices of medicine. I was told—perhaps one should not believe this figure entirely—that trade unions made certain demands as regards an unskilled cleaner who had been in the company’s service for 25 years which would cause him to receive an annual income of R27 000. The difficulty is that we are faced simultaneously with a high inflation rate and political pressure and certain trade unions are abusing this.

This Budget will not stimulate inflation any further; I am reasonably sure of this and take pleasure in furnishing reasons. There is no increase in indirect taxation; we also have a reduction in real State expenditure. We have a small deficit in the Budget which is only 2,7% of the GDP. The increase in our salaries is only 10% which actually means a decline in real terms.

Nonsense!

There were notch increases of 3% on average—as the hon member knows.

The hon the Minister had to be careful not to overstimulate our economy. At present our inventories are at a low point and, if the hon the Minister were to stimulate the economy out of proportion, we would have an enormous increase in imports. We cannot afford this as we are bound to pay certain amounts to overseas institutions.

The Government is preparing itself for better control of the inflation rate which is within its own power. Here I may mention the change in bank legislation of last year. This has made it possible for the Reserve Bank to control the situation better as regards cash requirements in the case of bank assets. Two or three years ago we did not know how we should actually control hire purchase but now we have the instrument for improved control.

In addition this Budget also provides us with money supply targets. Recently the Bundesbank published an article in which it was said that one of the most important reasons for the success of the German economy in controlling the inflation rate was that they set money supply objectives and succeeded in attaining them. Obviously this does not mean that one should be inflexible; one moves in the vicinity of certain percentages.

The hon the Minister is now being attacked on the 2% which is regarded as impractical; it is felt that it will not succeed. During the submission of evidence, however, we were told that each department retained the right of review on its case. This Budget was drawn up when the value of the rand was very low. Meanwhile the rand has improved and again slumped a little but I wish to tell hon members it will improve still more. The hon the Minister of Mineral and Energy Affairs is not present at the moment but chances seem favourable that the petrol price may even fall a little.

I shall go further. At the moment there is no general drought in the country so we think the hon the Minister has a good chance of achieving his objectives or not landing far off target. The deficit in his Budget is not large, however; if he should go a little to one side or the other, it would really make no difference. In my experience no businessman succeeds in achieving his budget exactly if certain adjustments are not made during the year. The hon the Minister has therefore created breathing space for himself to correct the Budget during the course of the year.

My third point as regards this Budget is that it is said it holds no direct benefit to lower-income groups; it is only for the rich. Indirect benefits should really be taken into greater account, however, because education, health and improved infrastructures will all receive great assistance from us. That does not look like only the rich benefiting.

The hon the Minister also adjusted the tax of a husband and his wife. I must mention to the hon the Minister that Mr Nigel Lawson, the British Minister of Finance, tabled a report the other day on the taxation of a man and his wife and I retained the idea that he did not know how to solve it. I have a great deal of sympathy for that Minister because the British say they will lose about R5 billion if they introduce the system of separate taxation.

The poor man supposedly obtains nothing but I find it very interesting that, whereas our excise duty on cigarettes is approximately 25%, it is 75% in the case of Britain. It is 22% on our beer and 36% in Britain. Whisky is taxed by 30% in South Africa and by 76% in Britain; the excise on petrol is 4% here and 61% in Britain. To which one naturally adds sales tax here. The most interesting of all is that our excise duty has remained the same whereas our prices have increased by 18% or 19% which means that the case of the person using these products has actually been improved indirectly.

We heard here about the problems of this country. I want to say roundly that our people should not be overpessimistic. We are not faring quite so badly in our country and we are not in the process of total collapse. I wish to explain this quickly. As early as the fourth quarter of 1985 there was a moderate upswing in the economy; this is not mentioned. In 1985 the real gross national product rose by 0,5%. Prof Hupkes of Unisa says we would do better to use the gross national product as an indicator instead of the GDP.

We can go further. Not all our enterprises are experiencing a recession; for instance our mining is faring well as it has a lively export market. Some of our farmers are certainly suffering but we should not generalise. Even the production of agriculture increased by 15% in real terms in 1985; this means that certain sectors of agriculture are faring well. Thirdly, financial institutions have not fared badly either. In sum, therefore, we see that the operating surplus of our private sector increased by 16,5%. In addition our savings have also improved; we have almost regained normal levels. The balance of payments account was exceptionally sound in 1985; there was a surplus of R7 billion. As we see the first indications of an upswing and as we have a prudent Budget, we should carry the message to our people that this excessive pessimism is unnecessary. In spite of drought, sanctions and enormous world pressure, we are growing again.

Mr Chairman, the hon member for Waterkloof raised many points which I shall cover during the course of my speech, so I am not going to react to them specifically. However, I should like to thank the hon members of the NRP for supporting the amendment of the hon member for Yeoville.

A budget can be analysed from three viewpoints, I should say. The first is the impact it has on the public. When one looks at this Budget one can accept that some people, particularly those in the upper and middle income groups who are predominantly White, would say that this is a good Budget because their tax rates have been reduced. However, that does not tell the whole story, because when one has a look at the Budget, one sees that the hon the Minister of Finance took R8,52 billion from individual taxpayers last year whereas this year, even after the abolition of the 7% levy and the 5% discount—which I am happy about— he will still be taking R10,253 billion from individual taxpayers. That is an increase of 20,3%. So, unless there is an incredible increase in the number of individual taxpayers—which is unlikely—fiscal drag will ensure that each individual is paying considerably more tax in 1986-87 than he did in 1985-86. [Interjections.]

The second viewpoint from which one can analyse a budget is as a forecast of how the Government sees economic and financial conditions. Unfortunately, as the hon member for Yeoville pointed out, the Budget as a forecasting instrument of the Government’s intention has lost credibility because figures are given for expenditure which are not going to be met. In 1984-85 the increase in expenditure was estimated at 11,4%, but it was eventually 22,5%. In 1985-86 it was also estimated at 11,4% but, according to the statistical economic survey, the increase was 21,6%. There is only one thing that we can say with certainty about this Budget as a forecasting factor and that is that any similarity between what eventually happens and what is forecast to happen will be purely coincidental. Indeed, this Budget is more suspect than most from that point of view because of that voluntary cut of 2% and because foreign exchange losses of R2,5 billion have not been taken into account and will be carried forward to some future date in the hope that the rand will rise.

However, the problem is if businessmen cannot rely on a budget for guidelines, what can they rely on? They hate uncertainty. If businessmen are uncertain, they do not invest. If they do not invest, jobs are not created. In a period of increasing instability and uncertainty the Budget now adds to that instability rather than reducing it.

The third viewpoint from which one can analyse a budget is the impact that it will have on the South African economy. Before one can do that, one has to see where we have come from. In the Statistical Economic Review which is a superb review—I commend every hon member in the House to read it—comparative figures for 1975 and 1985 are given. When one looks at these figures it is very interesting to see that in real terms our per capita gross domestic product has grown by 1,8% per annum. Our population has grown faster. So, what is the result? Our gross domestic product per capita was less in 1985 than it was in 1975, despite the fact that we enjoyed a gold boom during that 10 year period.

In 1975, when one looks at the consumer durable figures, as a nation we spent more money on furniture and household appliances in real terms than we did in 1985, despite the fact that our population had grown by approximately a quarter. That surely must say something about what has been happening to the standard of living of most South Africans. These figures show a stagnant economy failing to cope with the needs of a rapidly increasing population. What was the Government’s reaction? Mr Chairman, they taxed more.

In 1975 direct taxes were equal to 8,6% of personal disposable income. In 1985 they had increased to 13,3%. That is a significant increase when one remembers that these macro economic figures are normally relatively stable.

Increasing taxes was not enough, however. They resorted to debt. When one studies this survey, one finds that the servicing of public debt in 1975 accounted for 4,9% of Government expenditure. In 1985 it accounted for 14,2% of Government expenditure. We now spend the same amount on servicing debt as we spend on welfare services, pensions and public health combined. However, as we are seeing in South Africa, one cannot fuel our economy through debt. Neither is the situation likely to change in the long term, and this is my major criticism of this Budget. Before one can create economic wealth one needs to invest. The hon the Minister will know that in 1985 real gross domestic fixed investment in South Africa was less than it had been in 1975. In 1985 investment in real rand in agriculture was 57% less than in 1975, in manufacturing 14% less, and in community, social and personal services 33% less. The figures are in this review.

Without investment fewer jobs are created and unemployment increases. This is exactly what is happening in South Africa. Between December 1984 and December 1985 the registered number of unemployed among Whites, Coloureds and Asians rose by 90,9%. The number of registered unemployed Blacks—which we know is only a small portion of the total—increased by 63,6%. In the recent report of the HSRC it was pointed out how important economic development is if we want political peace in South Africa. Given these unemployment figures, is it surprising that we have social unrest in South Africa?

In a country like ours, the manufacturing sector is normally the dynamic growth machine. At the beginning of 1986 the number of people employed in the manufacturing sector was the same as it had been in 1975. There was no growth. The situation was even worse in the construction industry. Over the same period 95 000 fewer people were employed.

The Government now rushes around to create jobs. I want to ask them whether they do not realise the havoc that their economic policy has caused. It has led to the de-industrialisation of South Africa. Today the manufacturing sector contributes slightly less to the GDP than it did in 1975. Instead of trying to adjust the structure of South Africa to the changing world environment in which we find ourselves, they relied essentially on interest rate policy to make the necessary adjustments. What happened was that rates of interest became penal for many and death rates for some. Businesses collapsed, jobs were lost, investment plans were postponed or scrapped. The burden, moreover, was borne by the private sector, not the public sector.

In 1975 the public sector accounted for 22,9% of South Africa’s GDP. In 1985 it accounted for 29,2%. We were told we had to employ teachers and that we had to have more nurses. What is interesting is that when one actually examines the breakdown of the figures, one finds that the biggest increase occurred in State capitalism. The contribution of the public corporations over that period increased from 5,9% of GDP to 12,2%. Sir, they do not employ teachers.

While the level of employment in the manufacturing sector was constant over those 10 years …

Mr Micawber is a Socialist!

… it is interesting to note that the level of employment in the central Government over the same period had increased by 40%.

Much has been said about the wages paid, and my colleague, the hon member for Greytown, was criticised in this regard. I would say that no man overestimates his taxable income. That is the one time people do not fie about their earnings. When one looks at Statistical Bulletin No 3 of the Department of Inland Revenue, one finds that they have given a breakdown of personal tax according to employment group. This is very interesting. The percentage collected from those persons in the Government service sector increased from 16,8% in 1982 to 19,2% in 1984. Those are the latest available figures. In contrast, the contribution by the commerce sector has declined over the same period from 16,8% to 13,3%.

There has been a lot of talk about privatisation over the past year and a half. What we are all waiting for, is to see something actually privatised. The public sector has been and still is crowding out the private sector. A very interesting study was conducted into certain Third World economies. The researchers contrasted developments in Ghana and South Korea. It is very interesting, because in 1962 they were in much the same position. There was one dollar difference between their gross domestic products per capita. They were both heavily reliant upon the primary sector with the bulk of the people employed in that sector. They relied on exports.

Twenty years later, the per capita gross domestic product of South Korea was five times that of Ghana. It is not insignificant that in Ghana credit to the public sector was equal to 49% of Ghana’s gross domestic product. In South Korea it was equal to 2%.

In 1985—if this bulletin is to be believed— the public sector accounted for 55% of gross domestic fixed investment in South Africa. Today, because of this Government’s policy we are nothing more than an exporter of primary products. We are more reliant on gold today to pay for our imports than ever before. What we rely on, is the chance that something will go wrong in the rest of the world, and if things do not go wrong, then we are in trouble.

In the industrialised world, they have learnt how to combine moderate economic growth with low inflation. They are learning how to do things more efficiently, or they are learning to do more with the same. We are doing exactly the opposite—the same with more. We now have more Houses of Parliament, more governments, more MPs, more Cabinet Ministers, more Government departments and more Government employees. That is why the role of the public sector is growing bigger and bigger. It is the very policy of duplication and separation which is one of the prime factors in destroying our capacity for economic growth. One cannot compare this policy to federalism. Decentralisation of responsibility is an accepted managerial principle, whereas duplication of responsibility is not. [Interjections.]

To paraphrase Churchill, I should like to say that never have so many done so little with such disastrous repercussions. [Interjections.] The irony is that apartheid was meant to bring political peace to South Africa. Today, streets in South Africa are burning because of it.

It was apartheid which was meant to protect the White man’s wealth, as hon members in the CP still believe. They still believe in the iron law of wages, a theory which is approximately 300 years old. This policy of apartheid is making the White man poorer. In 1985 remuneration for employees rose by 9,8%. A few per cent of that went in tax and 16,2% went in inflation. In real terms the average man was poorer. The irony is that the very system that was meant to protect the wealth of Whites is making them poorer because it is one of the most inefficient ways of managing a modern economy. It stifles growth, and we are learning this in South Africa.

This Budget does not even attempt to address the long-term economic problems facing South Africa. We are going to have to change our whole structure. What we have here is some tinkering on the old economic machine, a machine that is rapidly wearing out. Perhaps we should know by now that we should not have expected anything better but I find it sad that, in a country with the incredible mineral and natural resources that South Africa has, we produced less per person in 1985 than we did in 1975. I ask the Government whether this is the best that they can do because, if it is, then it will be best for South Africa that they be gone.

Mr Chairman, the hon member for Edenvale made a reasonable critical analysis of the financial implications of the Budget. It was in stark contrast to the negative approach which the hon member for Yeoville revealed in his speech earlier this afternoon. I want to return later to a few statements which the hon member for Edenvale made.

The 1986 Budget can surely be seen as one of the greater success stories of the Government in the financial field. [Interjections.] I therefore gladly join speakers on this side of the House in congratulating the hon the Minister and also thanking him for what we have received, the estimated amounts of which we have before us today. Every budget expert and every financial analyst and critic are unanimous that this Budget will not produce the shock waves which were generally foreseen and expected. The criticism from the hon member for Yeoville and Sunnyside is due to the fact that the Budget did not contain those shock waves; because this Budget as such was a tame budget. For them it was too tame to criticise, and that is why they are displaying this kind of reaction.

The most encouraging aspect of the Budget is perhaps that it was possible to budget without having to rely too heavily on foreign loans in order to supplement the deficit before borrowing. We have succeeded in avoiding the strangling effect of foreign loan capital. It would have been a popular step to be able to budget for greater tax relief, and then relying on loans in order to make up the deficits. Such a step could have had the effect of stimulating and speeding up growth which we are very much in need of at present. It could have been the catalyst for real growth in our economy. However, the lesson of 1985 is still fresh in our memory, a lesson we shall have to remember for a long time, and to which we shall have to react. Foreign financial involvement is at best a bonus and must be dealt with as such. The luxury of foreign loan capital must be dealt with as an accessory, and must not become a necessity.

Government spending has to a large measure been brought under control. The departments that have in fact made a contribution to accomplishing this deserve the praise of this House. Overspending has to a large extent been checked despite drought aid, job creation and training programme all of which made heavy demands and for which provision had to be made on the expenditure side of the balance sheet of the recent Budget. The R600 million which had to be spent on job creation and training was not money wasted. The Standing Committee on Finance expressed their point of view on this; they appreciate the fact that this amount of money has been made available. It is a worthwhile investment, and will pay a very high dividend once the economy has improved, to provide people with training during a levelling-out period. Productivity, one of the most essential anchors for sustained growth, is thereby stimulated. The shortage of trained and better trained workers is thereby alleviated. The acceptance by the public sector of a mere 10% increase in salaries must not be dismissed as being inevitable. The contribution made in this way towards making the accounts balance, to further curb demand inflation, thereby increasing productivity, is a great and significant contribution for which there is great appreciation.

The standing committee also took cognisance of the obligation placed on each department by the Treasury to save a further 2% on budgeted expenditure. The hon member for Yeoville referred to that. Seen superficially it is a reasonable and healthy attitude, namely “see for yourselves where you can save”. I do however share the concern that labour-intensive departments will ultimately be obliged to save on personnel since there can be no alternative to saving. A healthy growth in teaching staff for example—and here I want to refer specifically to Black education—is of the utmost importance. Where personnel expenditures account for 80% of the running costs, a 2% saving can have a significant effect on the provision of personnel. The same would apply to the Police, the nursing profession and all other labour intensive departments—as the hon member for Yeoville pointed out.

I want to refer to personal tax. The concession of a 20% discount on the income of a married woman is certainly of great value and importance and great appreciation for exists—also for the 5% rebate on taxable income after other deductions have been made. This component addresses what is probably the most important task of the Margo Commission, namely the scale of personal tax. It must be accepted that the scale has reached its maximum and cannot be used in future in order to obtain additional income. What I am saying is that in future it would have to be accepted as a fact that we have reached the ceiling in terms of increased direct taxation. Evidently the present notch of personal tax is high and may have to be lowered. It is perhaps not opportune now to speak and debate about it. The Margo Commission itself will definitely express an opinion in this regard, whereupon we will be able to debate the matter fruitfully.

What we have to tackle now, however, is the increasing demands which the various communities will make on the Treasury in future. In the reform programme in which each community shall have to compete for a position it is essential that funds be made available for those demands. It is now becoming time the provision of services—I am referring specifically to services—the community concerned be it local or that of a group, will have to pay for such services. The building of a swimming pool is for example a purely local community situation. But such a swimming pool also has identified specific and limited uses. A sports stadium, which has been erected in a determined area, is possibly in the national interest, but it also has a limited number of uses.

Are you including Pretoria?

Take a library for example. It can be erected for use by a local or a regional community but the uses of such a library are identifiable and can be counted. What I mean by this is that there are specific uses which can be identified and which can and must pay for that specific service. The Treasury—be it the central Treasury, a regional treasury or a local government treasury—can no longer be held responsible for coping with the total costs of providing a service. A levy on the use of services will have to be recovered from the user of such a service. The user of a sports stadium, a library or a swimming pool can therefore be expected to pay a reasonable levy for that specific purpose—the purpose for which the levy is imposed—for example for the maintenance of such a stadium, library or swimming pool for the repayment of interest on its capital outlay and so forth.

The same principle will also be applicable to the provision of services, eg electricity, water, sewerage, and so on. Regional services councils will shortly initiate this concept of tax collection. The rendering of services by the regional services councils will be made possible by the contributions or levies which will be paid by the users of the services concerned. The same principle will then be carried through, for example to education, when it has been accepted that the State has certain primary obligations which it has to meet and which is its essential and primary task, namely the maintenance of law and order, the safeguarding of the State, and so on. In future careful thought will have to be given to the other responsibilities of the State. To what extent must the State accept responsibility for housing for example? Is free education, as we know it at present in South Africa, viable? A start shall have to be made to increase parental responsibility, financial as well.

When I refer to the scale of personal tax, therefore, reckon that its ceiling has been reached, and argue in favour of the levelling-off of the scale, it is definitely necessary to start looking for alternative sources of revenue. If we all take a look at the principle of community involvement it seems logical to me that the community concerned, and then more specifically the individual user of services, will have to accept a personal responsibility. As the groups in South Africa organise themselves into a new political dispensation and acquire a position for themselves it is going to become necessary to become financially involved. The South African—and now I include everybody in South Africa—will have to rid himself of the concept of putting out his hand and will have to show a greater willingness and a tendency to accept joint financial responsibility for the services which he uses.

Mr Chairman, the hon member for Gezina made a few interesting observations. In the first place he maintained that this Appropriation was one of the Government’s great successes. I must say that the Government is very easily satisfied when it refers to its successes these days. [Interjections.] The hon member went on to say that they were still suffering a great deal from the lessons of 1985. I now want to remind the hon member that they tried to praise the 1985 Appropriation just as effusively as they are trying to praise this year’s Appropriation. Moreover, the hon the Minister of Finance said in his Budget Speech last year that South Africa did not belong to that long list of countries that could not pay their debts. A few months later, however, he rescheduled the settlement of South Africa’s debts. [Interjections.]

The hon member for Gezina then made another observation, to which I should like to refer. He began preparing the ground for new sources of taxation. I shall return to that later. However, that means only one thing. He is telling the voters of Gezina: “Vote Nationalist and pay!” [Interjections.]

I think that this Budget is one of the most dangerous budgets South Africa has ever had. The hon the Minister is budgeting for an increase of 13,9% in his expenditures compared with last year’s budget. Over the past few years, however, the Government has not been able to keep to the appropriated amount. The previous year the hon the Minister budgeted for an increase of approximately 11%. The increase, however, was 22%. The same thing happened the year before that: The Government was not able to keep to the expected increase.

The hon the Minister is cutting his Appropriation so fine that he is budgeting for a deficit of R3,9 billion. If, however, he does not keep to his 13,9%, and spends only 3% more, so that the increase actually becomes 17%, his deficit will not be a mere R3,9 billion, but R4,9 billion. If the hon the Minister spends 6% more than he has budgeted for— over the past four or five years it has been exceeded every time—the increase will be 20%, and his deficit will then be R5,9 billion. [Interjections.] The situation will then be extremely dangerous; and judging by the hon the Minister’s history, particularly last year, there is a 100% chance that it will be at least 20%, or even more! What will the position be then? This Appropriation will then be an extremely expansionist one. The hon the Minister will again have to make use of bank credit to finance his deficits. Renewed pressure would then be exerted on the interest rates, and inflation will be fuelled.

Secondly, the market does not believe this Appropriation. The hon the Minister’s banker, in his report, provided figures different from those with which the hon the Minister provided us here. The hon the Minister told us that he had not financed his current expenditure from loans. His banker, the SA Reserve Bank, however, tells us on page S98 of its report that the hon the Minister did in fact use R1 327 million to finance his current expenditure. I now want to tell the hon the Minister that the market believes the banker.

Furthermore, the hon the Minister said of his 1985-86 Appropriation that its deficit had not been financed from the banking sector. His banker, however, told us that this was in fact the case. Indeed, he did so to an increasing extent during the last quarters of that financial year.

Furthermore, it appears from page 34 of his banker’s report, that the hon the Minister’s deficit figure of R2 300 million is not correct. According to the hon the Minister’s banker, this figure is actually R3 452 million. I am therefore telling the hon the Minister that the market does not believe his Appropriation—both in the light of his own history and in the light of what his banker is now saying about what actually happened last year.

I want to tell the hon the Minister that although excessive spending, as far as the country is concerned, has been restricted, the Government has in no way contributed to this. In fact, the Government has in no way contributed to this. In fact, the Government has aggravated the situation by spending more than it should have; and the man in the street, the ordinary individual, has paid for it.

What is more, this Appropriation has been cut so fine that if the hon the Minister cannot keep within his budget, we can expect chaos in South Africa. The situation is exactly the same as it was last year when the hon the Minister told us we were a secure country, and that we would be able to pay our debts within four months. He was not even aware of the gravity of the situation.

If one asks oneself what South Africa’s potential is, it appears that that potential is in the process of degenerating, because the economy is not working at full capacity. Moreover, the supply of fixed capital in the manufacturing industry is diminishing. In other words, the very sector in South Africa that should be creating job opportunities and producing goods that can be sold and that can earn money, is steadily diminishing under this Government.

What is more, this Government is proceeding with the redistribution of income. The hon member for Paarl quite clearly conceded this here this afternoon. I still remember very well—I was a young MP on that side of the House at the time—how the Progressive Party enthusiastically advocated the redistribution of income. The erstwhile Prime Minister of the NP then stood up and said that the redistribution of income did not rest on real economic principles, and it bordered on communism. Today they are its advocates, and the hon member for Paarl came along and tried to justify it.

They also come along with soppy little stories say that we should not want to keep everything for ourselves. No one wants to keep everything for himself. I want to tell the NP today, however, that they think they can buy peace with concessions and gifts, and that they can build up and satisfy the Black peoples with the spoonfeeding they are engaged in at present. No people becomes great when it is simply given something; it becomes great through dedication, exertion and by using its talents and what has been entrusted to it to the best possible advantage. This makes a people great and it gives it satisfaction. It brings out the best in it, and promotes self-respect. What the NP is doing is not making peoples great.

The Government is going ahead with salary parity without taking productivity into account. We say a man should be paid what he earns. If he does not earn it, one does not pay him. The Government does this. [Interjections.] I want to tell the hon member that the principal of a Black primary school receives the same salary as the principal of a White primary school. The Black man needs only Std 8, and two years’ training thereafter, whereas the White man needs Std 10 and four years’ training. [Interjections.] While the White principal and the school committee and the parents wear themselves out trying to maintain discipline and trying to get the children to come to school so that they may educate them to be productive in the economy of the future, the Black school is about to be burnt down, and the hon the Minister invites those who bum down the schools to come and breakfast with him. He takes no steps and applies no discipline.

The subsidy on housing and transport is simply of such a nature that no government in the world could afford it. No government can afford a subsidy of 90% on housing. According to the National Housing Commission’s advertisements that have appeared in the newspapers, a Black man and people of colour can buy a fully serviced house for R1 200 and R1 300. What did that house cost? It did not cost all that much, but R20 000 or R30 000! The rest is subsidised. [Interjections.] I ask hon members on the other side where in South Africa a White person could buy an empty plot at that price. Now one can understand why the houses are being burnt down. One buys a house with two months’ salary. It is easy to burn it down because after two months one buys another house. The CP does not begrudge people of colour anything but then they must earn, own and acquire it by their own exertions and their own efforts, and they must be proud of it. [Interjections.]

The redistribution of income is being proceeded with. More money is being spent on social services and the unemployed. The hon members of the Government are now falling over themselves to say that they will rebuild and restore the damaged schools, which were built with funds from last year’s Appropriation. Of course, in this way people are being encouraged to burn down buildings. After all, the Government should have told those people that only one conclusion could be drawn if they burnt down the schools, and that is that they did not want them. If they do, then, want schools, they must restore them themselves. [Interjections.]

I am now asking the hon NP members how much peace they have achieved with their concessions and their gifts. They have not achieved peace; merely more unrest than before.

According to the hon the Minister of Finance’s banker, individual current income increased by 107% from 1980 to 1985. Tax, however, increased by 270% over the same period. The hon member for Sunnyside pointed out to the House this afternoon who the super taxpayers in South Africa were. They are the Whites. He indicated what that money was being spent on. The hon the Minister is very proud—this is his only little achievement in the Appropriation—that they reduced tax by R1 100 million. If, however, one begins to take into account the fringe benefits, it is R700 million. If one further takes into account that the regional services councils are being set in operation this year, and that new levies are in the offing, the R1 100 million in tax concessions is wiped out entirely.

In my opinion the major charge against the Government and its economic policy is its performance in the agricultural sphere. In any developed industrial country, agriculture is the basis of the whole economy. Whereas every other department’s appropriation has been increased, the hon the Minister has cut the agricultural appropriation by 17%, and increased the propaganda bureau’s appropriation by 125% to defend the Government’s case. If one does not have a case, one needs an increase of 125% in order to defend one’s poor case. The hon the Minister is cutting the agricultural appropriation by 17% at a time when the high inflation rate and the increase of price-cost inputs have the farmers against the ropes, and liquidations are the order of the day. I therefore want to tell the hon the Minister that he would do well to attach importance to the representations being made to the Government by the SA Agricultural Union in this connection.

South Africa’s agriculture would also benefit greatly if the hon the Minister of Transport Affairs were to return to the Agriculture portfolio, because he is a man that understood agriculture and could have achieved something. I will even go so far as to say that if the Ministry of Transport Affairs cannot do without him, he should simply have a look at agricultural affairs on Friday afternoons at 17h00, when the Railways has “tshayile”-ed. The hon the Minister can still go and farm on Saturdays, because in any case he will accomplish more than the two hon Ministers of Agriculture that we have at the moment. [Interjections.]

There is another reason for South Africa’s poor economic condition and economic performance, and that is the political instability created by this Government. No economy can survive, flourish and grow in conditions of political instability. It is an irrefutable fact that through all the years of apartheid we had a positive real growth rate. The moment the NP announced that power-sharing would now be its policy, however, the South African economy fell like a stone. For the past three years we have had a negative growth rate, and all sorts of problems such as debts that cannot be paid and an inflation rate that has reached record heights. All of this happened after power-sharing had been accepted.

The political road that the present Government has taken can have only one constitutional outcome, and that is a Black majority government for South Africa; there can be no other outcome. This is now the Government’s policy. Now I know of an hon Minister who said at a public meeting that if South Africa were to have a Black government, all investments in South Africa would dry up. That hon Minister should no longer be sitting on that side of the House; he is sitting in the wrong place. [Interjections.]

I want to add that the Government is furthermore powerless to implement the course it has taken. The Government has already made four attempts to involve Black people and to start implementing the future Black takeover, but all four of those attempts have failed. First there was the Cabinet Committee of the hon the Minister of Constitutional Development and Planning, and we heard that he spoke in secret with 135 Black leaders. However, no one knows who they were. Perhaps it was he and the Broeders that now want to talk to the ANC.

A forum was then established and these 135 Black leaders were to have come forward and taken part in the forum. However, not one of them came forward. The State President said later that anyone that wanted to could simply come along, but no one came.

Then the State President came along and offered to extend the functions of the President’s Council and to alter its composition. No one that wanted to serve on the President’s Council turned up.

The State President then came along at the beginning of the year and announced his national statutory council. He wrecked that council of his himself within two days. So there he sits again with no initiative or progress along the road of integration he himself has chosen.

We now have the ridiculous situation in Natal in which the Natalians are progressing faster than the South African Government in handing over government to the Black people. The liberals are now getting fidgety. They say it can be done because the Natalians are doing it, and they are setting us an example, but this Government with its wings, split personality and doubletalk is not capable of doing so.

I want to say further that the security situation in South Africa is, in addition, not such as to promote the economic growth of the country. Last weekend the National Education Crisis Committee held a meeting which we have all read about. They took certain decisions there. They decided to return to school but to put new demands to the Government. According to Die Burger of 31 March 1986, Mr Zwelakhe Sisulu, editor of New Nation, said the following at the conference:

The children have returned to school because they are not yet ready for the revolution they have planned, and because they are biding their time before they continue with it. I therefore want to say that South Africa has now reached the point at which the Government has lost total control in every sphere. There is absolutely nothing over which it still has control in South Africa. [Interjections.]

I want to say this to the Government: These children have made new demands, but before the year is out, the following demand will be made to the Government: “Hand the country over to us!” I now want to ask the hon the Minister of Law and Order whether he is going to agree with the State President and the hon the Minister of Foreign Affairs if they want to hand the country over to the revolutionaries.

[Inaudible.]

This demand is going to be made, and the hon the Minister knows that there are some places where it has already been made. He knows this! That demand comes from more than one quarter, and I now ask the hon the Minister whether he is going to do this or not. This feeble Government which has not been able to resist a single demand, which has complied with and yielded to all the demands, must answer the vitally important question that South Africa is now asking: Is this feeble Government going to give in to this final demand?

[Inaudible.]

Therefore I want to say that the Government does not have a mandate to sit here and do what it is doing. We therefore say in our amendment that an election should be held because this House of Assembly is not representative of the Whites of South Africa. It is unrepresentative. [Interjections.] The Government must hold an election because there is only one solution for South Africa: We must have a different government and a different policy; that is, the CP and its policy. [Interjections.]

Mr Speaker, I should like to begin by asking the hon member for Lichtenburg whether he and his leader were not the Minister and Deputy Minister of Black education. [Interjections.] Are we not reaping the fruits of that today? [Interjections.] Let us go further. The hon members must answer a question for us here. The hon member for Lichtenburg says we cannot control anything. He and his leader cannot even control the AWB and they are bed-fellows. [Interjections.] These are the problems we have to contend with today, and once again I ask: When he was an hon Minister, did the hon member for Lichtenburg not sow the seed of which we are gathering the harvest today? [Interjections.] He is jointly responsible for our having problems today. [Interjections.] I am accusing the hon member for Lichtenburg of that, but he will get another chance to reply. In addition I want to tell him that hon members on my side of the House will discuss the agricultural policy, but the hon the Minister of Agriculture and Water Supply replied so nicely to the hon member during the own affairs Budget debate.

He was not here!

As usual, however, he was not here. The hon the Minister is sitting there. The hon member can ask him for a copy of his Hansard, then he need not make that speech every time for every Minister to reply to him. [Interjections.]

I want to return to my own speech, however, and begin by conveying my sincere thanks to all people … [Interjections.] I ask for your protection against the noise over there, Sir. I think the hon member for Kuruman must continue to read his new Nasionalis today, as he has been doing, then at least he will be learning something if he does it here now. [Interjections.]

I want to thank the hon the Minister of Mineral and Energy Affairs for making certain concessions. While the fuel price will drop once again in future if everything remains stable as it is now, I once again want to request all people who determine prices and tariffs to convey a drop in their prices and tariffs to the consumer when the next fuel price decreases again. I do not think the previous fuel price decrease had the desired effect on prices in South Africa.

The hon the Minister of Finance granted certain privileges to the married women. I must be very careful in my choice of words now, since all women work. Some of them also work outside their houses, however, in the open labour market. I want to say to all highly trained women who are still sitting at home, that South Africa needs every trained person. When one looks at the statistics regarding the number of men as against women at tertiary educational institutions, the ratio is often approximately 50:50. A lot of women who have received tertiary training disappear in the process. In many cases their main reason for no longer working is the tax system. In my opinion it is necessary at this stage to diminish that aspect that is being criticised, slowly but surely.

I want to thank the hon the Minister for making a special adjustment here. As the hon member next to me said, it remains difficult to levy separate taxes on a man and woman who are married, since the problem of finding the additional money to provide for this will remain an unsolved one. I am pleased, however, about what has already been done and about the hon the Minister’s willingness to have further inquiries made into this matter. I also want to express the hope that every woman, particularly those who are trained in the specialised fields, will return to the labour market. South Africa needs these people, firstly to fill the gap of the existing shortage, and secondly because they must co-operate in the development of the RSA.

I also want to thank the hon the Minister for the amount of R600 million which he has made available to SATS in the form of subsidies and certain other write-offs in respect of interest benefits. This amount was a welcome addition to SATS resources which will help them to balance their accounts.

I want to devote the rest of my speech to a problem we are experiencing at present, viz the fact that primarily we need stability and security. Once that has been accomplished, prosperity will follow much more easily. That is why I agree with hon members who have spoken already and mentioned the R600 million for which the hon the Minister made provision last year to render certain assistance. The State President announced that R1 000 million will also be used in this connection, part of which will be made available this year. Although there are people who object when that money is made available, I want to ask the hon the Minister to go ahead. There was talk of parity. If in the past I did not pay someone enough according to his productivity, and I now adjust his salary to reach parity, will I be paying him too much? That is the question we must ask ourselves, because there are people in South Africa—certain Black doctors at Baragwanath, for example—who worked for much less money. They acquired the same training at the same universities, but worked for less money. They did the same work. In that case there was an underpayment. We simply have to bring both sides of this coin into perspective before we express such ready criticism. This applies to hon members of the CP in particular.

The instability of the past year was a very important factor as far as our foreign capital and the associated conditions, as well as the obtaining of loans and of money from abroad for the development of the RSA were concerned. Hon members all know what the problems in that connection are. They have been mentioned here a number of times. I am not going to repeat them. The problem remains, however, that capital is one of the decisive inputs when it comes to the creation of prosperity and provision of work in this country. Along with the concept of stability, I regard provision of work as one of the most important factors which we shall have to attend to in this country. This applies to both the long and the short term.

On certain occasions in his Budget speech the hon the Minister of Finance also referred to the importance of provision of work. I believe if we can provide people with the opportunity to do their work—to go and sell their labour—most of the present unrest will subside. I should also like to say that the hon the Minister indicated clearly that he will help the SABC to extend the creation of job opportunities in the small business sector by means of a further amount of R30 million. He also made an appeal to the private sector. I hope the private sector will comply with it, since an amount of R60 million from that quarter can make a great contribution to this objective of provision of work which, from an economic point of view, should be the first priority for each and everyone in this country.

The future capital assets of this country will have to be generated internally to an increasing extent. The problems that arise with the influx of new foreign capital have been discussed already. Saving will therefore have to take place internally. It has been pointed out on various occasions in the past how little is saved in this country, how little people care; they buy, because tomorrow the prices rise. I think we shall gradually have to begin a training process to change this state of affairs a little.

Foreign capital is welcome in this country. In my opinion we should go out of our way to encourage foreign capital; this is imperative. We must remember, however, what happens to foreign capital. It represents the finest example of flight capital. The moment there is instability, or there are political or any other risks, that capital flies immediately. We have seen it happen, and we also see it happening in the rest of the world. We must always remember in this country how Mr Butcher of Chase Manhattan “slaughtered” our economy. This should be one of the lessons we have learnt in respect of the economy in this country. We must remember how easily the rug can be jerked from under our feet because we are so dependent on foreign capital.

I want to thank the hon the Minister for the exemption limit of R500 on taxable investments. This was a very welcome increase, especially if we think that this is only the third year since the hon the Minister introduced it, and that he began with R100 two years ago. We shall simply have to realise that a country must build up a large cash reserve before it will be capable of financing its boom. This applies to the RSA as well; indeed, I think it applies to a greater extent here because we are so much more dependent on ourselves for own capital.

I want to ask the hon the Minister: I should not like to abuse the requests we have all made that the existing tax basis become smaller—if the opportunity presents itself and there is room for this next year, whether he does not want to increase the amount in respect of annuities and pension funds which has remained the same for a number of years. The hon the Minister has made certain concessions this year, and we thank him for this. My request, however, is that he should pay attention to this matter now. It has the further advantage that the Minister will also be encouraging people to make provision themselves for their old age. I think this is the advantage we should encourage, as we can get no more money from the Treasury.

I want to make a proposal to the hon the Minister and ask him to announce a savings year. We have had a year of green heritage and also a water year; I think he should announce a savings year, because then we can make people realise that the advantage is that we can build up enough capital internally and become more independent.

The second advantage is that it cracks down on inflation. If we stop buying and force the prices down in that way, it will make a contribution—not such a great contribution that the inflation rate will drop overnight, but it can contribute a few percentage points on the basis of the present 18%.

In conclusion I want to point out the problem South Africa has, to prove that it is imperative that we encourage the people in this country to save. I want to take my example from an article which appeared in the Economist of 15 March 1986 which expressed foreign capital as a percentage of the gross domestic product. In the case of South Africa we received only 0,2% per annum from abroad in the form of direct investment for the 1981-84 period as against Singapore’s 10,4%, Hong Kong’s 2,5% and Malaysia’s 4,5%. This is further proof of the necessity of getting our people to realise that we shall have to save if we want prosperity in this country.

Mr Chairman, the hon member for Primrose made certain interesting points, but he will pardon me if I do not follow up on what he said.

Today is the first day of the second half of the 1986 session. One of the major questions we have to put to the Government, is to ask where the concrete proof is of the reform which the State President has envisaged as far back as August last year in his two so-called Rubicon speeches. Where is that reform? What reform was brought about in the first half of this year’s session? We have not had a single piece of valuable reform legislation that has removed apartheid in any way from the Statute Book; on the contrary, although the Government did in fact set up certain central business districts on an administrative basis, in general certain steps were taken in recent months that which actually impeded the process of reform. I could mention numerous examples, but I shall let the matter rest by asking one question today: Where is the reform that was promised?

Against this background the hon the Minister of Finance has presented an Appropriation which contributes nothing to relieving the situation. This Appropriation is clear evidence of the Government’s complete lack of vision for the future. It is also clear evidence of the excessively high costs of the Government’s apartheid policy.

†The costs of this Government’s policy of apartheid as applied since 1948 have been incalculably high. There are the social and political costs of the deep and bitter alienation of vast numbers of our fellow citizens from ourselves as Whites which will take decades to expunge. There is the cost of growing international isolation which has reduced South Africa from a nation of honour and esteem in the world community to that of a despised outcast. [Interjections.] There is the awesome cost of lost opportunities and broken bridges in every sphere of life. There is the cost of the talents of generations of people who are not White that have not been developed to their full potential; and there is the outflow and the lack of inflow of some of the best brains and talent available. [Interjections.]

Order! Hon members must lower their voices. The hon member for Constantia may proceed.

Finally, there are the hard economic costs measurable in rand and cents which have been exacted to finance the policy of apartheid. These rand and cents economic costs include the costs of massive population control; the regulation of labour; the administration of the hated pass laws; the removals of hundreds of thousands of people from settled communities; the cost of trying to consolidate land on a racial basis; the cost of subsidising commuters removed from inner city areas to outlying townships; and the costs of the so-called decentralisation programme which is merely another way of spending money to keep rural Black people away from urban White people. There is the cost of maintaining and subsidising homelands—those artificial rural ghettos which in many cases would not deserve to exist as separate administrative entities in a normal society.

You ought to be ashamed to talk like that.

I stand by it. There is the staggering cost of maintaining increasingly burgeoning security forces to defend borders which are under pressure but which were not under pressure before apartheid; of administrating swollen prisons and of policing an increasingly restless population. There is the cost of maintaining South Africa’s vast public sector bureaucracy which now employs 1,352 million people excluding the universities, technikons and certain State corporations. This represents over 27% of all economically active South Africans outside of the agricultural sector. This bloated percentage is certainly due partly to an element of inefficiency but, in addition, it is greatly contributed to by the fact that we maintain the abnormalities of the apartheid system.

The payroll of the United States of America’s federal budget consists of some 8% of total government expenditure but here it is more than three times that. The difference is some measure of how much we have to pay for the National Party Government’s policy.

Bloodsuckers!

Finally we have the tortuous multiplication of services provided for in South Africa’s new Constitution, and worse, envisaged in the hon the Minister of Constitutional Development and Planning’s plans for second and third tier levels of government scheduled to be implemented this year. The Government is going further into the fire.

It might interest hon members to know that I have done a quick comparison of the percentage make-up of four national budgets which were introduced at four different times during the past 40 years. Firstly, the Budget of 1947 which was the last one introduced by Minister Hofmeyr in the Smuts Government; secondly, the Budget of 1966 which was the last budget introduced under Dr Verwoerd; thirdly, the last Budget of the Vorster Government in 1978 prior to the take-over of Mr P W Botha; and finally, this year’s Budget.

The last budget. [Interjections.]

Those are prophetic words!

It will interest hon members to know that the national Budget as a percentage of the immediately preceding year’s GDP at factor incomes at current prices has grown as follows: In March 1947 against a GDP for the previous calendar year of R1,637 billion, the Government introduced a budget estimated at R235 million. The percentage in that year was 14,4% of the previous year’s GDP. In 1965 the GDP was R7,474 billion, and March 1966 the budget was R1,332 billion so the percentage in that case was 17,8%. In a period of almost 20 years the Government’s slice of the cake had grown from 14,4% to 17,8%.

What has happened since? In 1978 the slice had grown to 29,3% and, in the latest Budget which the hon the Minister of Finance has just presented, it is 31,5% of last year’s GDP.

While I am in no way endorsing the budgetary priorities of the Smuts Government and the Verwoerd Government, it is interesting to note that if the same percentage of GDP for the national Budget were to be applied this year, the money which would be saved by the taxpayers would amount to R20,3 billion out of a total Budget of R37,5 billion. If the same percentage applied in 1966 was applied this year the saving would be R16,3 billion.

Order! I regret having to interrupt the hon member, but the hon member for Pietermaritzburg South used the expression “bloodsuckers”. Was he referring to the Government or to hon members on that side of the House?

Mr Chairman, I was referring to the way in which the Government spends our money.

Order! The hon member must withdraw that remark.

Mr Chairman, I withdraw it.

The hon member for Constantia may proceed.

Mr Chairman, may I ask the hon member a question?

No, Sir, my time is running out.

How much money was spent on Black education in 1947?

In my view it is possible, when one looks at this year’s Budget by itself and extracts an estimate of those elements which could be laid at the door of financing apartheid and then assesses all the elements to which I have referred, to make a rough estimate of the gross cost of apartheid. Taking the direct costs of apartheid together with a factor for bureaucratic inefficiency and the multiplication of services, I arrive at a rough estimate of some R8 billion as wasteful expenditure for the current year. Such a figure represents some 20% of the total Budget of South Africa. Another way of looking at it is that this Government could go far towards abolishing individual tax with the savings it could make if it were to abandon the policy of apartheid completely and rationalise the operating of the economy of the State accordingly.

Naturally, we cannot restructure a society overnight and a PFP government would naturally also have constructive priorities of its own which would cost money. It is clear, however, that if this country were deliberately to move away from the distortions that apartheid has created, we could channel the enormous sums of money presently applied to the maintenance of this system in more productive developmental and educative directions, and at the same time probably allow our much-burdened taxpayers a tax cut in order to stimulate growth, confidence and investment.

*I could say more about the specific cost of apartheid, but I want to touch upon another matter in the time left to me. I want to make an important statement which I have made before on various occasions—the first time in the 1982 Budget Debate—and that is that I am accusing the Government of the fact that it is adopting the same course as Rhodesia’s Mr Smith and his people.

†This Government is walking the same path as the Rhodesian Front walked in Rhodesia because of the striking parallels between the two governments’ approaches to the question of constitutional rights for Blacks. We in the PFP warned, way back in 1982 and 1983, that the present 1983 Constitution is dangerously flawed because it provides for the permanent exclusion of Blacks as a precondition for Coloured and Indian inclusion.

The parallels between the State President’s 1983 tricameral Constitution and Mr Ian Smith’s 1969 parity constitution are disturbing. They are chilling.

[Inaudible.]

If that hon member listens to some of the facts, he will learn something. Firstly, both these constitutions were ushered in with overwhelming majorities obtained in White referenda.

That was Prog policy.

That is where the hon member is completely wrong. [Interjections.] Separate voters’ rolls, racial discrimination and separate tribal trustlands are some of the parallels between the NP Government’s policy and Mr Smith’s policy. There are extensive parallels. In the case of Rhodesia they had a “yes” vote in the referendum on the 1969 constitution of nearly 75%. This Government had a majority of 66% for its 1983 Constitution.

We warned that the 1983 Constitution would face the same grave danger which was faced by Mr Smith’s parity constitution namely that it risked triggering a Black rage that would not be able to be controlled. It gives us no comfort to note that it has been this new Constitution which has spawned a range of increasingly radical resistance organisations of various kinds, and that it was within weeks of the final implementation of the 1983 Constitution that the unrest started in Black townships in earnest and has been compounded ever since. I wonder if this Government, in its wildest dreams, imagined the extent of the Black rage and resistance which we warned about and which has been set in motion with their new Constitution. The situation has now reached the point where the Government has lost control of a number of Black township areas.

Nonsense!

I want to tell that hon Minister that the control which they exercise hardly extends further than the short shooting range of a patrolling Casspir. [Interjections.]

You are talking nonsense! [Interjections.]

As the Casspir moves through and out of the townships the control moves with it.

Give the names! [Interjections.]

Order! Hon members must allow the hon member to proceed with his speech. [Interjections.]

The same thing happened to the Smith government in Rhodesia, although in that case it happened in the tribal villages. The punishment of the necklace which is meted out today in South Africa’s townships as a punishment for collaborators, is reminiscent of similar treatment meted out in the tribal villages by the forces of the Patriotic Front in their effort to gain control over those areas. In Rhodesia the resistance forces gained control of those tribal village areas and in South Africa those forces are gaining control over the townships.

Where?

The public is fully aware of how the saga ended there.

[Inaudible.]

That hon Minister is living on a different planet. He is in a dream world if he thinks he has control over those townships.

Why don’t you comply with the presiding officer’s ruling?

Why don’t you keep quiet!

Mr Chairman, the Smith government continued to walk down the road of diminishing options until they had no more bargaining power left. Cannot this Government see that they are walking down the same road of diminishing options? Are they like dullards that must wait for events to overtake them and wreak havoc in their lives before they know that they have a bad policy? [Interjections.] Cannot they see that the only way to ensure a peaceful and secure future for South Africa’s minorities in a democratic way of life under the rule of law is precisely to begin implementing a democratic non-racial way of life under the rule of law now for South Africa’s majority who are presently denied their fundamental rights as equal citizens of this country?

Mr Chairman, when one listens to the hon member for Constantia, one gets the impression that the Official Opposition has already thrown in the towel.

When one listens to the speakers from the various opposition parties one realises that when they discuss the Budget they are in fact playing a political game. The hon members of the CP maintain that the Budget does not comply with their wishes because it was occasioned by a policy of power-sharing.

It is true.

Yes, it is true and they are true as well, and your truth gets one nowhere. [Interjections.] The hon members of the Official Opposition have the other version of apartheid. It is clearly a political game.

At this stage I want to say that I believe that we have a lot to thank the hon Minister for, as well as those who help him in this extremely difficult task.

When one reads articles dealing with the Budget in the Press and in periodicals I believe that the general conclusion which one may quite justifiably arrive at is that the amount of praise for this present Budget exceeds the criticism. I want to return now to the hon members of the Official Opposition. When one listens to those speakers one gets the impression that they are in fact in favour of the capitalist or free market system. Yet when they negotiate they do so with organisations that are outspokenly socialist. Those same people told the former leader of the Official Opposition in Lusaka quite explicitly that: “If we take over the Government in South Africa we shall nationalise the industries and the mines.” They are therefore prepared to sit down with those very same parties around a conference table at a national convention. They will do it with people who explicitly told them: “We are not prepared to accept a free-market system.” What does that imply? I should like to hear from the hon member for Constantia what his attitude in this regard is. Will he be prepared to accept it if that ally of his, with whom he is prepared to sit around a conference table, insists that he wants a system in terms of which he can nationalise the industries and the mines? Will he accept that? May I ask the hon member for Constantia whether he will accept that? The hon member is quiet now. I could have expected it because he blows hot and cold.

The hon member for Houghton recently said in a conversation with Mr Hugh Murray…

Do you know that that was the NP policy?

I cannot hear what the hon member for Yeoville is saying. [Interjections.]

The hon member for Houghton recently said in a conversation with a certain Mr Hugh Murray that she was in favour of a capitalist system. I do not think she will deny that. At the same time, however, the PFP is prepared to talk to people who are advocates of a different system.

Let us turn now to the hon members of the CP. It is surprising what simple statements and conclusions are being made. The way they go about it it seems as if the entire budget and the financial measures in the country are so simple that one little matter has a bearing on another. Surely it is a complex system; surely it is not quite that simple! [Interjections.] The hon member for Lichtenburg said with great conviction that this country was in need of a new government and that the CP had to take over. [Interjections.] Are these people not ashamed of themselves? They want to take over the government of this country but they have no policy yet! How can a party govern a country without a policy? When wil the CP be able to tell us how their system of territorial separation is going to work? What is their pattern going to be? [Interjections.] We simply hear nothing more about it. These people simply circumvent it and present us with a theoretical political policy which they are trying to sell to the voters. It will not be able to stand the test in practice.

Do you people have a theoretical policy?

That is not the case at all.

Do you know what your policy is?

What is your policy? [Interjections.]

After all these years, have those hon members still not learned what it is? [Interjections.]

As far as the Budget is concerned I should like to state that a Minister of Finance has an extremely difficult task, to keep the expenses of the various Government departments within limits as far as possible. I think it is a difficult task to persuade colleagues and their officials to keep expenditure within limits. It is an important facet; it is extremely important that the expenditure of Government departments be kept within limits.

I should briefly like to mention a few factors which have a bearing on the expenditure of Government departments. I should like to refer to rationalisation in the Public Service. This process commenced in 1980. It has already entailed certain advantages—we accept this and have noted it, with appreciation. The number of departments has been reduced and certain posts have been abolished. We are aware of this. This process also included the redistribution of functions which contributed inter alia to the number of Government departments being appreciably reduced. This is of course an ongoing process and as a result there is still appreciable opportunity for improvement of the effective utilisation of manpower in the public sector.

We know that the second tier of government is going to be changed soon, if I may put it that way, and many officials are involved in this. It is also on the agenda. In this process of rationalisation it is very important that we ensure that overlapping or duplication of duties does not occur. Something like that is very possible. It is only a natural or a psychological approach on the part of bodies who exercised control over certain things and who had certain officials in their employ that they will not easily wish to relinquish such things. It is very important for this country that we limit Government expenditure as much as possible.

In accordance with Standing Order No 19, the House adjourned at 18h00.