With government finances under pressure, the ANC is looking for ways to shift the debt burden, write Mungo Soggot and Madeleine Wackernagel
The African National Congress has recruited consultants to find a way round the mounting public debt problem in a bid to free up government finances.
Professor Peter le Roux of the University of the Western Cape this week briefed a party study group on the effects of stripping state pension fund obligations from South Africas expenditure tally. The move would cut the deficit as a percentage of gross domestic product (GDP) to 2% one percentage point lower than the 3% target for the year 2000 and way below the current 5,4%.
But warned an economist: The timing is somewhat suspicious with an election around the corner. Artificially reducing the deficit in this way could pave the way for a spending spree.
The decision on the part of the ANCs left wing to call for the briefing suggests concern is growing over the governments interest burden already the second- largest component of the national Budget. And the strategy of adjusting South Africas books to cut the deficit would bolster the argument that the economy is in much better shape than suggested.
The problem is that the government is already expected to wildly overshoot its target thanks to an almost 11% increase in spending instead of the budgeted 5,2% increase.
Le Roux said he had resurrected the findings of the Smith Committee, set up two years ago by the Department of Finance to explore changing the way South Africa calculates its deficit. He said the committee had suggested providing two sets of deficit figures: one that included the pension fund liabilities and one that did not.
ANC MP Andrew Feinstein said this weeks briefing was merely exploratory, but that the group planned to broaden the discussion and bring in members of the ANC national executive committee. Feinstein said there were two thrusts to Le Rouxs presentation: how the method of calculating the deficit could be restructured to make it much lower and how South Africa could change the way it handles state pension funds to cut governments exposure.
Feinstein said Le Roux had pointed out that many other countries excluded their pension fund obligations when working out their deficit. He gave the example of Italy where government debt, already pegged at 60% of GDP, would be about 460% if it included pension fund obligations.
The Congress of South African Trade Unions recently added its voice to the debate, calling for a switch to pay-as-you-go and recommending that every opportunity be taken to bring pressure on the ANC to change the system.
Such a shift would be politically sensitive and government could not afford to come to hasty conclusions, says Professor Ben Turok of the Finance Committee. Maria Ramos, director general of finance, has been tasked with looking at ways to restructure the public debt but there is nothing on the table yet.
We want to be very well briefed before any decision is made, added Turok. This weeks discussions were simply part of an ongoing process.
Switching to a pay-as-you-go system would mean that current employees pay into the fund, and past employees are paid out of current revenue.
The government could then close down the old pension funds and in one go wipe out a significant portion of debt.
But the concept of liquidating such funds would not go down well with civil servants; the government would have to lobby hard to assure them that their pensions would be protected, no matter the state of public finances in the future.
Feinstein said, however, Le Roux had rejected the pay-as-you-go revamp as being too complicated.