Lehohla slams South Africa’s levels of indebtedness

FORMER Statistician-General Dr Pali Lehohla has slammed South Africa’s levels of indebtedness as a result of the government’s decision to borrow money from multilateral lenders.

Lehohla yesterday said the government should be using the country’s large pension funds savings to alleviate some of the most pressing issues such as unemployment and poverty.

He said that there was no need for the government to borrow billions of rand from the International Monetary Fund (IMF), the lender of the last resort, as the money could easily be raised internally.

South Africa received a R70 billion loan from the IMF in 2020 and R11.4bn from the World Bank this year to support job creation and protection for businesses negatively impacted by the Covid-19 pandemic.

“South Africa is the only country in the developing world that has large pensions. Yet we use high-risk emerging market borrowing instead of borrowing from our own pensions,” Lehohla said.

“The developed world borrows from pensions and we borrow from the IMF and others. And that is what causes, among others, a lot of problems for us.

“We do not need to borrow from the IMF. We do that because the government is corrupt and the private sector is corrupt.

“What the government is doing is actually triggering the tragedy of both the commons and the ruling class. Both are actually destroyed instead of optimising the system for inclusivity.”

Lehohla, who is known for not mincing his words, was giving a keynote address at the opening of the Black Business Council (BBC) Summit 2022 in Johannesburg.

The BBC Summit aims to create a platform for enhanced engagement around issues of creating jobs and growing the economy through supporting localisation, industrialisation, SMMEs, black-owned, women-owned and youth-owned businesses.

Lehohla also lamented the escalating rate of unemployment in South Africa which remains the highest in the world at 35.3 percent of the working-age population.

He said that 1 million more people aged 15 to 24 had been pushed out of jobs in 2022 compared to 2008, while 500 000 less people were employed in the 24 to 35-age category in the same period.

“The story is very disturbing, yet the president says we have employed so many among the youth. The figures do not support that. Who gives the president the numbers?” he said.

“The Statistician-General presents the numbers, who are the bureaucrats who then advise the president on this for him to make this kind of statement because it is wrong?”

Lehohla also pointed out the government’s failures when it comes to developing proper economic policies, saying that foreign direct investment had dwindled in the hay of policy confusion.

He said the entire framework for economic policy was facing downwards, with even the terms of trade growing very much “immiserizing”, a phrase popularised by Indian economist Jagdish Bhagwati.

Immiserizing growth is a theoretical situation first proposed by Bhagwati where economic growth could result in a country being worse off than before the growth.

“South Africa is going through that immiserizing growth,” Lehohla said.

“We had plans, but those things don’t look like plans to me.

“The only thing that mattered like a plan was the RDP, the rest have just been worse. But the New Dawn, the 9-point plan, Asgisa, they are just a list of things that don’t make sense,” he said.

President Cyril Ramaphosa addressed the summit later in the evening, responding to some of the concerns raised by Lehohla.