‘Truth’ about SA’s apartheid debt

MOLEFE TSELE

Support for Maria Ramos’s assessment of South Africa’s indebtedness is misplaced

The ministry of finance wants to solve our apartheid problems by a statistical sleight of hand. Consider its claim that there is no apartheid foreign debt. Giving full meaning to Mark Twain’s aphorism about three kinds of lies – lies, damned lies and statistics – director–general of finance Maria Ramos and her departmental colleagues claim that the foreign debt is "only" some 5% of the total debt.

Even if this were true, 5% translates into R15–billion. It is interesting to hear that R15–billion can be dismissed as trivial. Yet:

A mere 0.17% of R15–billion would restore the rail service to what it was before the recent cuts.

R4–billion would provide housing for the 200 000 families on Cape Town’s housing waiting list.

R400–million would provide all our schools with textbooks.

The finance department, however, wants us to believe that R15–billion is not worth a raised eyebrow.

What is more, R15–billion is merely that part of the foreign debt acknowledged by the finance department. The total apartheid foreign debt is in fact more than R100–billion.

There is an easy explanation for the discrepancy between Ramos’s figures and ours. She conveniently chooses to exclude parastatal and private–sector debt from the equation. The R15–billion is the current size of only the government’s portion of the total foreign debt.

Excluded from the government debt are the private apartheid foreign debts of the parastatals (the Eskoms and Transnets etc), private companies, banks and other financial institutions.

All foreign debts, however, are the responsibility of the Reserve Bank and are paid out of our national foreign exchange reserve, with a very direct impact on our national balance of payments. This is why it is called our "national foreign debt". But this is precisely what the finance department does not want us to know.

The international sanctions campaign against apartheid and the government’s attempts to get around it account for both the smallness of the public debt and the large size of the private debt.

The finance department is keen to present Jubilee 2000’s position as being unilateral repudiation of the foreign debt. This falsehood allows the department to be a scaremonger, to conjure up a most horrendous retribution by the international community. History suggests the opposite.

We have good reason for expecting our foreign creditors to agree to cancellation of the debt. Thanks to the precedent set by the government of the United States, international jurisprudence allows South Africa to call on the Doctrine of Odious Debt. This doctrine frees our democratic government from all foreign debt liabilities incurred during apartheid.

Morality compliments the Doctrine of Odious Debt. Jubilee 2000 attributes a sense of morality – albeit a belated one – to our creditors.

Moral outrage resulted in Swiss banks recently agreeing to refund the profits made out of the Holocaust. The condemnation of apartheid as a crime against humanity was based in no small part on the lessons learnt from the Holocaust.

An appeal to those who profited from apartheid might similarly result in them agreeing to cancel debts that continue to penalise the same people who suffered under apartheid. Pressure and direct action both here and abroad might be required to encourage the creditors to do the honourable thing. A negotiated settlement would be reparations to the majority of our population apartheid abused so grievously.

All this – and more – remains untouched by the "quiet reasoning" of the finance department.

Take, for instance, the additional matter of the Government Employees Pension Fund (GEPF). This fund is the largest single component of apartheid’s internal debt. The finance department wants us to believe that any meddling with the fund would both create financial havoc and destroy the life savings of "ordinary", nice South Africans entitled to the security of comfortable living after a lifetime of hard, honest work. Neither of these claims has the slightest validity.

The department is also happy to spread the idea that the fund has nothing to do with apartheid. Apartheid is in fact at the very heart of the fund. The massive injection of public money into the fund came about as a result of an effectively secret deal between a dying apartheid regime and its most senior officials in 1989.

Distinguished human rights lawyer George Bizos, in his recent book, No One To Blame?, details how police general after general, facing the threat of being exposed as criminally responsible for the terror and murder of the apartheid death squads, took early retirement on full pension. These are the direct, intended beneficiaries of the unusually generous pension scheme created in 1989. But the finance department continues to pretend that the scheme has nothing to do with apartheid!

Another myth the department refuses to ditch is the idea that the fund consists entirely of pensioners’ contributions. The reality is that the vast majority of the fund is public money put there by the government since 1989.

However, unlike other government money – such as that paid to the heavily means–tested recipients of child benefit – the finance department insists that the GEPF alone is beyond public control. Therefore, while the recipients of child benefit – officially defined as being among the poorest of the poor – have had their meagre benefits slashed in order to spread the benefit more widely, the GEPF, reflecting all the inequalities of the apartheid wage structure, is said to be untouchable.

Keeping the fund untouchable means a very heavy and continuing drain on the public purse. This ensures that those discriminated against by apartheid continue to be discriminated against by the fiscal preference given to the apartheid–designed GEPF.

Making the finance department’s position even less tenable is the fact that it is perfectly possible to change priorities without threatening the pension of single member of the GEPF.

The fund sits on huge reserves put there by the government. Reverting to a pre–1989 scheme would, at the stroke of an accountant’s pen, make this money available to transform the lives of those apartheid condemned to poverty.

Given the strength of the argument against the apartheid debt, the obvious question is: why, rather than leading the campaign against the apartheid debt, is the finance department so assiduous in its efforts to rubbish the campaign?

The answer is now an open secret. The department suffers from an overwhelming fear of upsetting international investors. Yet this anxiety is misplaced.

The evidence shows that

Rather than punish the apartheid government for its 1985 debt default, the international creditors did everything in their power to help the odious apartheid regime (see Challenging Apartheid’s Foreign Debt (1997) by Jeff Rudin, AIDC, Cape Town). Why should one presume that the same creditors would behave differently towards the now democratic post–apartheid government, even if our government, as part of its efforts to overcome the legacy of apartheid, were to challenge the apartheid debt?

Law and the power of morality make a negotiated cancellation of the foreign debt perfectly feasible.

Enhancing this prospect is the fact that the foreign debt is small when compared with other debts that have been written off, or effectively cancelled, with out a murmur. Britain, for instance, still owes the USA $14.5–billion dating back to the World War I. This sum is more than what the whole of sub–Saharan Africa owes the US. Recently the US, forpatently political purposes, cancelled Egypt’s foreign debt and cut Poland’s debt by 50%.

The Government Employees Pension Fund provides the government with a number of options, all of which are capable of releasing money for large–scale attacks on poverty and of achieving this without endangering the pension of a single person.

Shaping all the government’s socio–economic policies is the apparent imperative of attracting foreign direct investment. The smallness of our domestic savings is supposed to be behind this alleged imperative. Foreign direct investment (FDI) doubled last year. What has passed without comment is that domestic capital leaving the country exceeded FDI by some 26% last year (Business Day, November 11, 1998). If nothing else, this puts the whole emphasis on foreign investment in its proper perspective.

Behind the finance department’s rigid anxieties is the lack of political will, or self–confidence, to challenge the so–called Washington Consensus, despite the current crumbling of that consensus.

There is a huge amount of popular support abroad for the cancellation of apartheid’s foreign debt and mass support at home for a more equitable use of public money than the presently constituted GEPF.

The government has both the moral authority and the popular backing to do what is right.

Dr Molefe Tsele is chairperson of Jubilee 2000 South Africa.