318 THE SOUTH AFRICAN NATIONAL DEBT. 



be paid out of current revenue ; the remaining seven-eighths might 

 be borrowed ; and there would be no special obligation to repay 

 either of the amounts raised on loan. This does not mean that 

 the bonds issued should be of indefinite currency. For other 

 reasons, already mentioned. Colonial Governments should stick to 

 the plan of borowing by means of bonds or stock for, say, 30-40 

 years. But it means that the loans so maturing should be 

 renewed, as a matter of course, on the best terms the market 

 offers. 



The effect of carrying out this policy in a progressive com- 

 munity for a long period would be equivalent to that of a sinking 

 fund, which cannot be tampered with ; for the debt will be kept 

 steadily down to the value of the property acquired with it, whilst 

 present conditions of progress endure. Fortunately for us, this 

 policy has been followed out to some extent. Thus the capital 

 value of the railways is stated as 86 millions, of which only 

 73 millions are now owing, the remainder having either been 

 paid out of income, or borrowed and repaid out of subsequent 

 income ; and a controversy arose, recently, between the Railway 

 Department and the Treasury as to which of these sums the 

 railways should be required to pay interest on. There is, how- 

 ever, no rule requiring the provision of a part of the cost out 

 of revenue, and it is likely that when loans fall due they will be 

 renewed, whether the renewal has been justified by previous 

 expenditure out of revenue or not. The contention of this article 

 is that it should become a legal obligation to provide one-sixth or 

 one-eighth of the cost (other than of land) from revenue — a 

 larger fraction, of course, if the improvement is of shorter date. 

 Some of the debt has been incurred to meet deficits. This 

 stands on an entirely different footing, and ought to be repaid. 

 But so far as the policy of public works is concerned, the adop- 

 tion of the present proposal would put the country on a sound 

 financial basK 



It must be understood that this solution is one proposed for. 

 and is only applicable to, new countries whilst expanding con- 

 siderably ; that is to countries like South Africa in its present 

 phase. In existing circumstances, a sinking fund, if such were 

 established by law, would be ineffective, for the colony would 

 undoubtedly go on borrowing faster than it repaid; and tins 

 consideration has influenced the Government, for, actually, sink- 

 ing funds have long been abandoned. No Cape loan since 1882 

 and no Xatal loan since 1884 has been provided with a special 

 sinking fund; the Transvaal loans have, but that is on account 

 of the guarantees of the British Government, which, of course, 

 does not intend to make itself responsible for Transvaal debt 

 after the present issues have been paid off in 30 or 40 years from 

 now. With that exception, the creditors of South Africa are 

 content with the general promise to devote surpluses to paying 

 off debt. The latter provision should be maintained in any case, 

 as it is effective in years of plenty. The proposal should not. 



