The truth about the apartheid debt
INTERNATIONAL INSTITUTE FOR RESEARCH AND EDUCATION:
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The Truth and Reconciliation Commission is supposed to confront the enormity of Apartheid's crimes, so as to allow South Africa to move forward The Cape-Town based Alternative Information and Development Center (AIDC) says the country's foreign debt is part of that burden, and should be abolished. The Apartheid regime left the new South Africa with huge debts that are crippling any chance of implementing real reconstruction and development. In a bizarre twist, the people who suffered at the hands of the apartheid government are now being expected to pay again for their pain and
The South African government has a debt of R311 billion (IUS$ = R4.81, £1 = R8.0) and it is growing all the time. In the last budget presented by Minister Trevor Manuel, the amount the government spends just in interest payments is now said to be greater than on anything else. R39 billion was allocated in the budget for interest repayment.
Added to this debt of R311 billion, must be added billions of rands that are owed to foreign governments, banks and other financial institutions, which now must be repaid in foreign currency. In repaying these debts the Reserve Bank uses very scarce resources that damages our economic standing. Our foreign debt is
R90 billion. Compare this with R82.8 bn., which is the amount needed to employ all the country's unemployed for one year.
Most of the government's debt comes from apartheid. When the government of
De Klerk realised their days numbered they incurred huge debts so as to prevent the ANC, when it came to power from implementing programmes of redistribution and social upliftment.
Many people's organisations have begun to campaign for this debt to be cancelled. The new democratic government stands in a strong position to negotiate the cancellation of the Apartheid debt. Firstly, it is not a debt incurred by them. Secondly, it is immoral to make the victims of apartheid pay for their victimisation. Thirdly, in international law there is a doctrine that
Eric Toussaint and Peter Drucker (EdS.)
20 International Viewpoint #295 allows new democratic governments to cancel the debts incurred by an undemocratic, illegitimate regime which it has replaced. Where the undemocratic government incurred debts at the expense of the majority of its people these debts are seen as odious. Áll loans made by Apartheid regime were as odious as they were illegitimate.
Trade unions, civics, women's and youth organisations are suggesting that the money saved from debt cancellation should be placed in a community controlled development fund. This fund would be directed to putting the Reconstruction and Development Programme at the centre stage of our efforts to free our nation from poverty and the misery brought by The debt burden
Many people know what it feels like to owe money, even if only to a bank for a mortgage. But it is a different matter altogether to be deeply indebted and unable to pay. And it is even worse to be in that situation if someone else ran up the debt and left you to repay it.
This year 20% of the national budget was spent on interest payments on debt. The current government debt is R310 bn. The government regularly says that the interest payment is seriously obstructing its growth and development programmes.
In 1989, the debt was only R80 bn. Yet, by 1996, it had grown enormously to over R300 bn. What lies behind such rapid
The largest single part of the answer lies in the pension fund for government employees. The assets of this fund have increased by well over R100 bn. since 1989 (from R31 bn. in March 1989 to R136 bn. in September 1996).
The reason for this ten-fold growth is that, in 1989, the government moved from a "pay as you go" system to a "fully funded" scheme. In a "pay as you go" sys tem people who are working today pay into a pension fund and those who retire receive payment from the money put in by those still at work.
This way of funding pensions is wellestablished internationally and continues to be used by the government to fund the state's welfare pension scheme. A "fully funded" scheme, as its name implies, means that it has the reserves available to meet its obligations even if all the workers currently paying into the fund were mysteriously to all stop working at the
"Fully funded" schemes same time. operate in the private pension market as a protection against the company going
The conversion to the "fully funded" scheme has involved a massive injection of government money into the fund. Between 1990 & 1996, government contributions to "pump up' the fund totalled R66,359 bn., or an average of almost R10 bn. a year. The Government didn't have this amount of money so it raised it by selling "bonds", effectively IOUs on which interest is paid.
The Government then proceded to sell these bonds to itself! It sold the bonds to PIC (the Public Investment Commissioners), a shadowy office within the Department of Finance specifically responsible for the investments of the State Pension Fund. The PIC is run by the Minister, the Deputy Minister, and Director General of Finance who are senior officials in the
Naturally, PIC gets interest on the government bonds it has bought - very high interest to be sure. Last year the government paid itself (PIC) no less than R10 bn. in interest. This means that the government (through PIC) is not only lending itselt money but is using Its money to pay itself enormous interest on the money it has lent itself.
The result of this madness is that PIC is now sitting on an enormous pile of money worth R136 bn. last year. And it accumulate government continues to feed it through direct contributions and interest payments.
More recently, PIC has placed large investments in the stock market. These market investments last year earned PIC an additional R4 bn.
Putting the R10 bn. interest from
Government bonds into perspective is the fact that the total cost of the state pensions paid out last year was only R9.2 bn.
Here are a few indications (from the
Reconstruction and Development Programme) of what could be done with the surplus money the government has sitting in PIC — while it continues to tell us that • 1,060 new clinics - R1.2 bn. • 300,000 new homes - R10 bn. • Electrification of 2.5 m. homes - R11 bn.
Alternatives
Laughing all the way to the (apartheid)
bank
Why did the apartheid government go for such a bizarre scheme? It would appear that they feared the in-coming ANC government might not maintain pensions prosecution for torture or murder, and keep their jobs. The Commission is unpopular Policemen who testify to the Truth and Reconciliation Commission can avoid to the employees of the apartheid state. It among victims of apartheid. "These men are asking the state for forgiveness," the fully funded system as a secure way of seems that the apartheid government saw complained one torture victim. "It is us they should be asking." both meeting gravy-train pensions for apartheid bureaucrats and allowing for. substantial golden handshakes and early retirement packages. It also seems that the apartheid government implemented a deliberate strategy of imposing a great debt burden on the in-coming democratic government to severely limit possibilities
Whatever the reasons might have been, the consequence is that our country's first democratic government is crippled by a scheme that requires the victims of apartheid to continue to live in poverty so that those privileged by apartheid can continue to enjoy their privileges. The government does not face a real resource constraint but a financial constraint left over from the period of transition. South Africa's government has enormous room to manoeuvre in terms of dealing with the debt and this can be done without harming a pensioner.
Instead of implementing severe austerity measures that lead to cuts in social spending and once again penalises the victims of apartheid, challenging the apartheid debt and channelling resources into fighting poverty would bring the RDP back to centre stage. Challenge the foreign debt
Democratic South Africa is expected to pay the R90 billion foreign debt of
Apartheid. This is a vast amount of money in anyone's language. The debt has to be paid back in foreign currency. Therefore, every time the rand falls in value against the US dollar the amount increases.
Some people have said that the foreign debt is not a problem because it represents only 5% of the total government debt. This is true but the South African Reserve Bank has to pay all the foreign debts - those incurred by the government as well as parastatals like Eskom, banks and big corporations - which by December 1993
The Reserve Bank uses scarce foreign currency reserves to repay these apartheidincurred debts which has severe consequences for our economy.
The loans made to apartheid South
Africa either directly to the government or to private banks and corporations was vital in keeping apartheid alive. Through these
Transformation and regroupment Reactions to the socio-economic crisis all too often take the form of reactionary tendencies of an ethnic, nationalist, racial or religious character. Hence the urgent need to rebuild a world-wide movement of anti-capitalist struggle, taking account of the recomposition of the workers' movement which is underway as a result of the double failure of social democracy and Regroupments of forces determined to learn the lessons of the historical abomination that was Stalinism and to continue, against the winds and the tides, to fight against capitalism are being realised in a number of countries. In all the countries where such possibilities exist, the organisations of the Fourth International are ready to be part of the re-groupment process. We consider this as an important step towards the recomposition of the anti-capitalist left on a world scale. At the international level, the Fourth International is an active participant in re-groupment, bringing with it the advantages of a long tradition of combat against capitalism and Stalinism. *
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Viewpoint, loans the apartheid regime was able to offset the effects of sanctions. One effect of these loans was to give comfort apartheid in the face of increasing international isolation. Indirectly these loans helped to free up the resources for the internal militarisation of South Africa and the military destabilisation of the whole of Southern Africa.
The call is not for Government to Just scrap the debt unilaterally. Rather, Government should enter into negotiations to get the creditors" agreement to cancel the debt. The basis for this would be powerful moral arguments. The apartheid system was universally condemned as a crime against humanity.
Yet foreign Government's, banks and businesses were deeply implicated in the creation, development and defence of the apartheid system. Doing business With apartheid was highly profitable. By agreeing to cancel the foreign debt they would effectively be internationalising the scope of the TRC by making reparations to democratic South Africa. Odious debt
In addition to these moral arguments the democratic government can rely on the Doctrine of Odious Debt, an old doctrine of international law. This doctrine allows successor Government's to disown the debt incurred by fallen dictatorships. The illegitimacy of apartheid, according to the
Doctrine of Odious Debt, made all loans to the apartheid regime illegitimate and
We anticipate that neither our government nor — for very different reasons — financial institutions and foreign Government's will easily be persuaded by moral and legal arguments alone. On the other hand, we are hopeful that a broad campaign, representing the organs of civil society, both here and abroad, will succeed in convincing the parties to do what is right.
The money saved through debt cancellation should be channelled into re-invigorating the RDP with its focus on providing the infrastructure needs denied the majority of our people under apartheid. *
The full text of the Alternative Information and Development Centre's submission to the Truth and Reconciliation
Commission is available at <http://aidc.org.za>
21
"Hostile forces" demand work and wages
Growing numbers of Chinese workers are taking to the streets to fight for their basic rights.
According to our correspondent
Zhang Kai, the authorities blame this social unrest on "conspiracy by hostile forces within and outside China" In recent years, more and more state-owned enterprises have gone bankrupt. In 1996, according to statistics of the Supreme People's Court, 4,900 enterprises all over China went bankrupt, of which 2,348 were state-owned. At the same time, 1,199 enterprises were merged.
One trick in the bankruptcy business is to transfer the property and some staff of one enterprise to another and then declare the former bankrupt, thus writing off all
Through genuine and fake bankruptcies, the number of unemployed workers has substantially increased. According to the Labour Bureau, in 1996 about four million redundant workers were assigned new positions. But on December 31st, 8.1 million workers were still "temporarily laid off", waiting for a new job.?
By the end of this year, according to the official media, there will be 60 million unemployed workers in the towns, not including the "temporarily laid off".*
At the end of March 1997, 11.0 million workers at state-owned, urban enterprises were on no-pay status, A further 2.3 million had their pension suspended, and over 9 million workers were "temporarily laid off". "With financially stranded workers and temporarily off workers reaching an unprecedented high, this has become a critical issue braking the healthy development of society and economy." "
The latest issue of Lookout reported a 7.5% urban unemployment rate, with 15.5
Jiang Zemin -Take revolutionary million unemployed. This is much higher than the 3.1% unemployment rate reported by the Labour Department. Lookout claims that unemployment is 4.5% higher than at the same time last year. Redundancy of state owned and urban collective enterprises had reached 30 million. The unemployment in counties and townships was even more serious, reaching 34.8%. An estimated 175 m. workers are
Some scholars and officials attending the 15th Party Congress believe that urban unemployment is as high as 8%, and rural redundant labour affects around 200 million people.? Workers fight for rights
Not surprisingly, protests and sit-ins have become more frequent. "In Beijing and provincial capitals of the Sichuan, Hubei and Hebei Provinces, serious incidents of turmoil by temporarily off workers and pensioners have occurred." 8
In March, workers at the biggest textile factory in Nanchong (Sichuan) went on protest against delayed wage payments. The General Manager Huang He was escorted on street parade by the workers, and the procession was joined by other workers. Over 20,000 workers occupied the city government building, the city was paralysed, and after 30 hours, the government promised that the bank would give a loan to the textile factory to pay wages to the workers.?
On June 20, 200 workers from the
Guanghua Timber Factory staged a sit-in protest outside the Zhong Nan Hai Central
Government complex. They demanded that the company, partly run by the State
Security Department provide them with accommodation, as promised. This is the first mass demonstration outside the
Zhong Nan Hai since 1989.°
In June, workers from several state- owned textile and clothing factories in
Mianyang (Sichuan) took to the street to protest the lack of subsidies after they were temporarily laid off. As many as
100,000 workers took to the street at different times. According to China
Human Rights Watch, over 100 people wete beaten up by armed police on or around July 10, and 80 were arrested Police prevented hospital staff from treating the wounded workers, who they called "counter-revolutionary rioters." On July 18, Ming Pao newspaper quoted the Mianyang City government official as saying that "in recent years, factory bankruptcies in the city have been serious."
Chinese worker activist Han Dong tang, "exiled" in Hong Kong, reported that in Chengdu (Sichuan), in the middle of July, about 500 shoe factory workers blocked the road for 20 hours on a demonstration against factory bankruptcy, until the city government promised to resolve the problem." In the latter half of August, in Dou Jiang Yan (Sichuan) about 1,000 unemployed workers had their tricycles confiscated by the authorities, took to the street on a protest and demanded the return of their means of living.