By Gerhard Papenfus
FOR IMMEDIATE RELEASE ON ALL NEWSWIRES
PRESS RELEASE: SOUTH AFRICA CANNOT BORROW ITSELF OUT OF TROUBLE
25 July 2018
In exceptional cases, the ability to borrow money might be beneficial. It might also be extremely detrimental and burden you financially forever.
If my son informs me that he has obtained a R 100 000 facility on his credit card, I will not be impressed. If he has proved himself to be a squanderer, I will in fact be extremely concerned.
It is therefore with deep concern that I read about the most recent Chinese lending facilities extended to South Africa: a further R 187 000 000 000 – among others for the squanders ESKOM and Transnet. China has also earmarked R 466 000 000 000 for South Africa; almost half of the R 1 000 000 000 000 target the president is chasing. The oil-rich Saudi Arabia and the United Arab Emirates have also chipped in a couple of 000 000 000 – a couple of billion.
Let us all be clear: there is no goodwill involved in this; this is a hard business decision; just as there is no goodwill involved in the loan from your credit card provider. If the borrowed money is not put to good use – that means generating more money through the money borrowed – you will forever remain indebted to the lender. Already a huge portion of the South African budget goes towards paying interest on previous loans.
The amounts mentioned above are only a drop in the ocean, in comparison to the existing loan account. Thus far we have seen little, if any, examples of the billions and billions borrowed being put to good use.
The same principles that apply to the finances of a household, apply to the finances of a country. Money borrowed must be paid back, even if it takes a lifetime. If you don’t meet your obligations, your assets are repossessed. If the parents are squanderers, the whole family is poor. If you make promises to your children which you can’t keep, they lose trust in you and eventually rebel. If your children do not understand where money comes from, they remain a burden – forever.
In South Africa, our minerals and the ability of the taxpayer to foot the bill if the investment turns sour, serve as the collateral.
You don’t borrow yourself out of debt; you achieve that by working harder and smarter and disciplining yourself. I don’t see that happening in South Africa. I don’t see the billions budgeted for education and healthcare being put to good use. I don’t see any major restructuring at ESKOM, or any of the other overburdened parastatals, being implemented. I don’t see tenders being awarded on the basis of best price for best quality. Many municipalities are bankrupt – taxes are demanded but not rewarded with good services. These are a few items on a very long list.
I see government officials (tax receivers) flying business class, while tax payers fly economy class. Because I can’t stand seeing this, I no longer fly SAA, unless I absolutely have to.
At this point, I must make mention of seeing Pravin Gordhan and Tokio Sekwale in economy class. There will be others. Then there was the incident where I sat in the last seat in business class, with Mr Cyril Ramaphosa (at that stage still Deputy President) sitting right behind me in economy class. He very politely turned down my embarrassed offer to swop seats. I haven’t sat in business class ever since.
To get out of our economic predicament, a lot of things need to change. We all will have to change our attitudes toward many things. We will have to tighten our belts. Government spending has to be cut. Skills and service delivery have to improve. The millions of people dependent on grants must be phased into the economy. From being a burden, they have to be transformed into economically contributing proud citizens.
To pay our debt and make real economic progress, the South African contributors will have to acquire and maintain the upper hand over the destructors, and government will have to make hard, even unpopular, decisions. At this stage, with one eye on the 2019 elections, government policies are aimed at appeasing the populists. This will not stimulate growth, neither will it achieve any debt relief.
Borrowing just brings temporary relief. While we applaud the President for the investments he has secured, government needs to be cautioned that, if they don’t fix the hole in the bottom of the bucket, whatever is put in, will simply spill out, and South Africa will in the end have nothing to show for it – in fact we will be much worse off.
This press release is by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA). He writes this in his personal capacity.
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