are we ready for democracy?

Matlosa and Shale of EISA state that:

"It should be emphasised that Lesotho’s politics tends to be marked by zero-sum nature of engagement of politicians across and within parties. This is explicable, in part, by reference to the country’s poor resource endowment. A small, landlocked and impoverished Lesotho has always been mired by conflict-ridden politics, in part, because the political elite perceive politics (through parties and the legislature) as a license to access state resources. Given bleak prospects for accumulation in the private sector, the state becomes a major avenue for accumulation and that explains why contestation for state power among the elite becomes so fierce and has generated protracted violent conflicts in the past. This helps us pose even a bigger or complex problem: what exactly are prospects for building and sustaining representative democracy in poor countries
without a sound economic base like Lesotho?"

On my first reading of this statement I was aghast, I know Matlosa! He is a son of the soil, we have shared lots of laughs, had a few beers, discussed serious issues, agreed and differed, how dare he? Who is he to assert that we are probably doomed to and endless zero-sum game?

In fairness, by the time I got to the part I have quoted I had already read and agreed with a large part of his analysis and had started reflecting on the discussion I had had with one of my very smart lawyer friends the previous evening. The purpose of my blog today is to provide examples that prove Matlosa and Shale's point while also highlighting some of the anomalies in my beloved mountain kingdom.

Sometime in the not too distant past parliament approved salary increases and benefits for parliamentarians, there was some disquiet about the revisions but the debate did not take on the intensity of the Merc issue. The salient points to recall from these are:

• MPs supposedly awarded themselves an 84% salary increase
• MPs supposedly also approved a scheme where each of them was entitled to an interest free loan of M500,000.00

My friend asserted that the parliamentarian's loan scheme costs us as taxpayers much more than the Mercedes Benz and Camry issue, and that we have kept quiet about it. I argued that we saw the Mercs and Camry everyday and that they always serve as a reminder that no matter how hard we work for equality it always seems to be elusive, that some appear to gain advantages that are not congruent with the amount of effort put in. He invited me to research for myself and see which was the worse evil, the Mercs and Camrys or the loan scheme.

My research has revealed the following:

• assuming 24 Merc E280 @ M445,000 are bought for cash we would spend M10,680,000.00
• if each of the Mercs was depreciated at 20% year, the car would have a value of M227,840.00 at the end of the three years.
  
• If these Mercs were then disposed as they were this year the lost to the taxpayer would be M227,480 * 24 = M5,468,160.00

I have been very simplistic in my assumption, I have assumed that the government would pay cash for the cars thus avoiding interest. I have completely factored out Imperial. I know that the govt. can get the Merc for much less money if they really tried. I have also figured the addition of about 40 Lexus is250s would not have a major impact on the above figures at worst they would merely double. The Lexi (is that what you call them when there's more than one?) would depreciate faster say 25%.

Now, lets analyse the loans, for simplicity I am going to assume that the Senator's are not entitled to the privileges that the parliamentarians enjoy. So my figures will be based on 120 MPs.

• if each MP were to avail themself of the interest free loan in the first three months of their appointment then we as tax payer would fork out M 500,000 * 120 = M60,000,000.00
• If was assume that the current rate of interest is 11% with a term of 5 years (expected stay in parliament) then the MP saves M152,272.69 in interest. The formula to calculate this is very simple in excel =(pmt(.11/12,60,500000) *60+500000),explanation offered on request.
• For 120 parliamentarians this figure is 152,272.69 * 120 = M18,272,723.06 this is already way over the cost of the Mercs.
• To make matters more interesting assume that each MP took the money and invested it on the stock market with a 10% annual return and did not touch the money for five years then you get the following picture:
• Value of investment end Year 1: M500,000*1.1 = M550,000.00
• End of Year 2 = M550,000*1.1 = M605,000.00
• By end Year 5 we have = M732,050* 1.1= M805,255.00
• At this juncture the member can repay the loan at one go a keep a profit of M805,255.00 - M500,000 = M305,255.00. Imagine if you were an MP for two consecutive terms!
  
• Now if all 120 MP were really smart they would then put their earnings together M305,255.00*120 = M36,630,600.00 and use this war chest to prosecute really heavy BEE deals in both Lesotho and South Africa. And they can claim, factually, never to have used public money!

Again I have been very simplistic in my assumptions, if you take a personal loan, then you pay interest with after tax earnings, that is, the cost of the loan to you is much higher than the assumptions made here. You would have to work much harder to repay the same loan, assuming the same period you would need M2,537.00 extra per month in after tax money!

If any of them are astute, which some are, what they will most likely do is use the loan to set-up businesses that will compete with us, the tax payers. They will use our taxes to ensure theirs and their kids advantage. If Lesotho were to put the M60,000,000.00 into Bedco so many lives could be changed, so many families impacted, so many more than 120.

So, if it were you, what would you do? Would you vote against the interest free loan? Would you strengthen Bedco, or would you feather your nest? Remember, you only live once!

Lest I forget the quotation above is from http://www.eisa.org.za/PDF/les2006floorcross.pdf