Actuaries, trained to solve complex issues, have offered to help government with some of its more intractable problems.South Africa’s debt level is projected to rise to 70% of Gross Domestic Product (GDP) by 2022, and assuming no policy intervention, will rise to 80,9% of GDP by 2027 and continue its upward trajectory from there.
“It’s a snowball,” the incoming president of the Actuarial Society of South Africa, Lusani Mulaudzi, says.“As the debt rises and interest compounds, the amount to be repaid snowballs, which means we will reach 80% faster than we reached 70%. From there it’s into the arms of the IMF.”
For many South Africans, this preoccupation with government debt is meaningless in the context of their own suffering. How to change this is something that occupies Mulaudzi’s mind.
“There are people who understand that unsustainable bailouts to SOEs will tip South Africa over a fiscal cliff and that the consequences will be dire — for instance, social grants could be cut. But there are many that don’t understand these linkages.”
On-the-ground understanding of assets, liabilities and public ownership of these also trouble him. If people appreciated the difference between the two, and the fact that when it comes to South Africa Inc, they own both, perhaps they would feel a duty of care.
“Eskom is meant to be a national asset, powering our industries to growth, yet it’s a liability. Similarly, the education system should be a national asset, creating the next generation of teachers, engineers and thinkers, yet it’s a liability, condemning most to a life of poverty.”
In the same way, libraries, schools, trains and hospitals are assets that belong to all, and should be guarded fiercely. Instead, they are vandalised and sabotaged, diverting scarce resources to their repair.
“We need to communicate these concepts in a way that people can identify with; South Africans need to feel a sense of pride and ownership over assets that belong to all of us.”
How to begin to shift this mentality is a question that Mulaudzi is grappling with. Actuaries are trained to solve complex problems and communicate possible solutions in layman’s lingo — and these do not have to be confined to the arcane workings of an insurance company or medical aid.
However, he is the first to acknowledge that the profession has not applied its mind to the “big picture” problems of South Africa. This may be changing.
The Actuarial Society has over the last few months created the Public Interest Actuary Portfolio within the society. This is designed to encourage the actuarial profession to initiate targeted research in areas of public interest. South Africa Inc sorely needs urgent and creative solutions, and Mulaudzi believes that a window of opportunity has opened up to provide these. This, he says, has been created by the willingness of President Cyril Ramaphosa’s government to work collaboratively with civil society to achieve key goals over the next 10 years.
Subjects that can be tackled include: what should policymakers do so that small businesses can become catalysts for economic growth? What more can be done to promote homeownership as a catalyst for wealth creation? How to fund free university education?
“We are not suggesting a silver bullet, but this research and the potential solutions can inform public discourse and be fed into the policymaking process,” Mulaudzi says.
The Public Interest Portfolio has already kicked off by focusing on National Health Insurance, the proposed Road Accident Benefit Scheme Bill, optimal resourcing of government departments, and the State Liability Amendment Bill that deals with settlement of medical claims against the state.
In his medium-term budget address to Parliament last week, Finance Minister Tito Mboweni tackled the thorny subject of government’s wasteful expenditure, forbidding ministers and their aides from flying business class domestically and vowing to cut cellphone and car allowances.
Among other measures, he also promised that focus would be brought to medico-legal claims which are run by “criminal syndicates” and cost government billions annually. This is an area where actuaries can help, Mulaudzi says. For instance, when lawyers are drawing up a claim for future expenses, actuaries can identify the waste, the duplication, and sometimes outright fraud.
“If we were to get involved, we would be taking bread off someone’s table,” he says. He means the unscrupulous lawyers and those that aid and abet them.
The challenge for both government and actuaries, he says, lies in the nature of the solutions that are provided.
“In the private sector, the work we do is valued. But in the government sector, where there are many different stakeholders, our reports may not be palatable.”
For instance, he says, “we could provide a solution to Eskom’s problems tomorrow, but would it be politically palatable? We need to learn to find solutions within the specific context — for instance at Eskom it would be that job losses will not be tolerated.”
At the same time, actuaries are bound by a professional code, and failure to abide by the ethics enshrined in this code could risk debarment.
“It is very important to present all sides to a possible solution — the upside and downside,” he says.
Mulaudzi has always had a strong social conscience. His parents are teachers and active church and community members in the Modjadji district in Limpopo and he was raised to think beyond the confines of the home. He was also a strong student who benefited from the good public and Christian schools in the area. It was a given that he would study further, but what he studied became the subject of some debate.
Mulaudzi was attracted to Stellenbosch University where he wanted to study a BA in value and policy studies, which is only offered there. Actuarial science was his second option.
“A counselling psychologist convinced me that it would be better to study actuarial science given my maths marks, my parents’ views and other factors such as funding opportunities, although my knowledge of the subject was very limited at that time.”
His parents wisely stepped back and allowed him to make the final decision — actuarial science it was. He graduated in 2012 and has done his time in the backrooms of Sanlam and Medscheme crunching numbers; he has done a stint as a company chief executive, and now he and a partner run a small consulting firm.
He will juggle his time between providing leadership to the Actuarial Society, taking the Public Interest Portfolio forward and earning his bread and butter through consulting. — Business Maverick.