LETTER: High debt cannot be ignored
Duma Gqubule’s references to the Public Investment Corporation and the Unemployment Insurance Fund reserves also neglect the other side of the ‘state balance sheet’
I agree with a number of points in Duma Gqubule’s recent column (There are Many Ways to Skin the Eskom Debt Cat, August 6).
The medium-term strategic framework used to implement the National Development Plan (NDP) is unwieldy and not working; the longer decisive action on Eskom is delayed the more costly any assistance; and creative thinking is needed to get Eskom’s balance sheet fully stabilised. Removing the National Energy Regulator of SA’s tariff-setting powers is an option he does not mention.
There are two problems with Gqubule’s arguments. The first is his persistent dismissal of debt levels with reference to non-specific international comparisons.
Empirical evidence does not support such nonchalance for a developing country that has experienced our rapid increase in debt to current levels, combined with negative per capita economic growth, underperforming revenue collection, a legacy of state capture in infrastructure investment and internecine battles in the majority party.
The second is that Gqubule’s references to the Public Investment Corporation and the Unemployment Insurance Fund (UIF) reserves neglect the other side of the “state balance sheet”.
The information on social security funds and contingent liabilities in the Treasury budget documents show that the picture he paints is misleading. The UIF’s forecast net reserves of R186bn by 2021-22 are dwarfed by the enormous, remarkably neglected, liabilities of the Road Accident Fund (R401bn by 2021-22).
Meanwhile, provincial medico-legal liabilities reportedly amounted to R80bn in 2018 and are rising. Many municipalities are heavily indebted, with the total being in the tens of billions, albeit that what they are notionally owed by users of services may exceed that.
In the necessary haste to deal with Eskom, let us not neglect the fact that the public balance sheet has other liabilities and its stability is even more paramount than that of Eskom’s — albeit that the separation is wearing thin.
Dr Seán M Muller
UJ School of Economics
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