THE SOUTH AFRICAN NATIONAL DEBT. ,} I 7 



manent improvements, especially in new countries, where the 

 burden is reduced by being postponed. On the other hand, it is 

 not fair to throw all the cost on posterity, by borrowing the money 

 and making no provision for repayment. A sound intermediate 

 course is to spread the payment over a number of years, accord- 

 ing to the estimated durability of the improvements. Accord- 

 ingly borrowers have been required to provide, in addition to 

 interest, a sinking fund, calculated to eNtinguish the debt in some 

 such period as 40 to 60 years. This rule has been adopted 

 regularly in the case of municipalities, which, of course, are not 

 sovereign, and often by sovereign States desirous of establishing 

 a good reputation in the money market. Unfortunately a bor- 

 rower — as was discovered in the case of the British Government 

 more than a century ago — may be driven to borrow at the same 

 time as he is paying into the sinking fund, and the latter then 

 becomes an illusory security. Even a municipality, which, may 

 be compelled, by law. to maintain a sinking fund, or to repay 

 at a fixed date, is sure to need new works, and so has an excellent 

 excuse for renewing each loan when it falls due. It cannot be 

 said, therefore, that the sinking fund method is an adequate 

 guarantee that the present generation will pay a fair share of the 

 cost of public works it undertakes, and it seems to me that some 

 other plan is demanded in the interest of sound finance. 



Even the improvements that are called permanent are not 

 really so. Most of the South African debt has gone into the 

 " permanent works " of the railways. There is a charge for 

 maintenance of these, it is true, but even when maintained in 

 good condition they may be subject to depreciation. Buildings 

 grow out of date and inconvenient, bridges inadequate, and so 

 on : the whole railway system may conceivably be rendered anti- 

 quated by the progress of invention. The same is true of 

 harbour and irrigation works. There is only one kind of pro- 

 perty whose value can be trusted as permanent, and that is land 

 itself. Apart from the actual value of the sites of public works, 

 it i- not safe to accumulate a public debt and hand it on by 

 successive conversions indefinitely to posterity. Probablv sixty 

 years is a fair limit to take for the duration of any improvements 

 But the question is how to be sure that they will be paid for in 

 this period, and be kept free from the jugglerv of necessitous 

 finance ministers. 



The solution I venture to propose is this: That zvhen any 

 work is undertaken, a fraction of the cost (other than for the 

 acquisition of land) sufficient, if accumulated for 60 years, to 

 equal the whole, should be paid for out of revenue. If interest- 

 be taken at 3^ per cent., this fraction is one-eighth, at 3 per cent. 

 one-sixth. The rule would mean then, that if the Government 

 wished to construct new railways or rather long-date works, it 

 should firsr estimate on a sound and conservative basis the cost 

 of the land. This might be borrowed. Next, the cost of the 

 improvements should be estimated, and of this one-eighth must 



