Special Hearings — Business Hearings — 1997-11-12

MR NAIDOO: Thank you, Rams.  Greetings to the Commissioners.  When Trevor Manuel announced his 1997, '98 budget, one fifth of the budget was allocated towards servicing the Apartheid debt.
 This kind of expenditure which was about 39,5 billion rands was the second largest slice of any of the expenditure items in our national balance sheet.
 It is a contention of a range of organisations that form part of this campaign, is that is precisely the kinds of resources that South Africa needs to currently spend to eradicate the legacy of Apartheid.
 Today for the majority of South Africans we are living through a very bad sequel to a movie that is called - that we could easily call oppression part 2.  It is scandalous, we argue, that the very loans that the National Party Government took to engage in acts of terror across our boundaries, to engage in acts of terror against its people, are the very debts today that in democracy and freedom the vast majority of our people have to service.
 We think that of all the outrageous things that - since within our transitional process one of the worst indignities and tragedies of injustice is to ask those that suffered under Apartheid, those that these loans in part financed that capacity of the National Party Government to today have to repay it back.
 You might think then that perhaps our situation is unique and there is no historical precedent and justification for those that suffered under Apartheid to raise the question of the legitimacy of these debts being serviced.
 We want to draw the attention of this Commission to a doctrine that was used by the United States at the turn of the century, called the doctrine of old year's debt, when the United States refused to pay a loan back to Cuba - Spain with regard to Cuba.
 Where the doctrine spelled out, simply this;  if the despotic power (indistinct) a debt not for the needs or in the interests of the state, but to strengthen its despotic regime to repress the population that fight against it, this debt is odious to the population of the state.
 Odious debt (indistinct) and used for ends which to the knowledge of the creditors are contrary to the interests of the nation, do not fulfil one of the conditions that determine the legality of the debts of the state.
 The creditors have committed a hostile act with regard to the people.  They can't therefore expect that the nation freed from the despotic power assumed the odious debts which are personal debts of that power.
 Those that lend money to the Apartheid Government, these include local commercial institutions as well as foreign commercial institutions.  Many of the foreign commercial institutions have had their debts repaid since.
 There are five European commercial institutions that still have debts that are being repaid.  It's important to note that this debt and this doctrine was not unknown to the lenders at that time.
 In 1982 in Chicago a consortium of banks would note the following words to caution other banks from lending South Africa;
"Lenders who finance the arming or enrichment of despotic rulers and the suppression of guarantees of protection from international law."
For years bankers have not exercise the vigilance that would make state debts lawful.  The consequences would be breath taking.  The Chase Manhattan's, Lloyds and (indistinct) might find that the third world loans were uncollectible, except for the personal estate of the Mark Hosos and Mabutus who contracted and we could add the De Klerks and the Bothas.
 The question we have to face however, is that what is the structure currently of this debt and how is this debt made up so that in coming to the TRC we ask that the TRC needs to add its voice to a critical examination of the structure of the debt as it sits today;  to look at how in fact this (indistinct) of justice can be addressed.
 Five percent of what we could call Apartheid Debt, debt incurred by the National Party Government, is owed to European commercial institutions.  We want to be clear that we are not calling for irresponsible unilateral cancellation of the debts. 
 All the organisations that have been involved in this campaign have engaged to the issue with what we would argue as a high level of responsibility.  We argue, however, that would those European commercial institutions, and we know the names, we know the details of when those loans were took, what the interest repayments are and so on;  that a compelling case can easily be made for our Government to enter into negotiations to actually cancel those - that slice of the debt.
 However, admittedly, that is a small slice of the debt.  The biggest slice of the debt where we think a story that needs to be told and we hope that the TRC can help the story to be told.  The biggest slice of the debt is owed in a funny sort of way to Government itself.
 It is owed to the public investment commission.  Now, I want to just for the benefit of others;  the commission has the diagram in front of them.  If we have Government here, Government has the responsibility to put money into the state pension fund for the worker, civil servants that work with the fund.
 The state pension fund then puts the money into something called the public investment commission.  The public investment commission is supposed invest the money.  The historical practise has been most of the public investment commission resources were loaned back to the Government itself when Government had a deficit and needed to borrow.
 So you had a massive flow of capital within this system.  Now in 1989, the National Party Government, seeing that the writing was on the wall in terms of a impending democratic Government, cynically changed the structure of the state pension fund.
 What it did was, it moved from what was a common practice in other countries of having what is called a pay as you go system towards a fully funded system.  So in essence what it means is, private companies have the obligation to have within the pension funds almost enough money to pay out all the employees if tomorrow the company were to crash.
 This is not a system used generally by Governments, because the assumption is made that Government will not need to have within its pension fund assets resources to pay out everybody, because the assumption is made that Government as institution is not going bankrupt.
 But what the National Party between 1989 was to change the pension fund system such that whereas in 1989 we had less than 7 billion in the public investment commission, that figure then rose between '89 and today to a figure of 135 billion rands.
 Now, today 40 percent of our burden in terms of servicing is owed to the public investment commission.  We have commission research which has been verified by various economists including Prof Pieter le Roux who is the head of the institute for social and economic research at the University of the Western Cape who also sat on the Smit Commission of the Government to look into the pension funds;  that by going back to the previous system of pay as you go without any burden and any threat to any civil servant within the pension fund, we would be able to free up a substantial amount of assets and write off some of the debt as well as be able to allocate and release money for social spending.
 The last slice of the debt is owed to local commercial institutions.  This is an area where we have struggled in terms of the research that we've been doing to ascertain clearly which local commercial institutions lent money to the Government, when it was lent and so on.
 It is a project that if we are going to seriously understand the truth of what happened under Apartheid, we need to actually understand more clearly.  If we are serious about reconciliation, then we would argue that there cannot really be reconciliation in this country if children who have not yet even been born will grow up in a world where they in fact have to carry in part the burden of the debts that the previous National Party Government took. 
 We also I think need to ask the question as part of discovering the full truth of those institutions that lent the moneys to the Apartheid State and have subsequently been repaid.
 I want to conclude by saying that the submission goes into a lot of technical detail with regard to the economics of the question.  We are convinced that the work that we've done and the economic verification that we have done, makes a compelling case of our Government to re-open the question of the debt that was inherited from the Apartheid State;  to look at it with vision, with courageousness and with rationality.
 We think that the Truth and Reconciliation Commission has a critical role to play in terms of adding its voice to ensuring that this process is kick started in facilitated.
 We believe in short that you cannot put energies ...(tape ends).....