Present and future value are the cornerstones of practically any financial analysis. Present value is either known or can be calculated, if we agree on the likelihood of outcomes and the time value of money. We can’t do much about the present (whether we like it or not), but we can surely prepare for what lies ahead.
We may be unable to predict or influence the future, but financially at least we can put acceptable boundaries around outcomes (likely or not), and even acts of God. At a basic level, we pay for insurance not because we know the house will burn down, but just in case it does. It works in the aggregate because individual risk is able to be priced off general experience.
The pay-off profile is obvious and unavoidable. There can be no harvest without planting. A financially rewarding future requires current sacrifice. The need to save for a rainy day has never been more starkly presented to us.
The devastation wreaked by the recent floods in KwaZulu-Natal is indeed a catastrophe of national proportions. Any loss of life is always an immeasurable sadness. There is little point dwelling on what could’ve or should’ve been done to mitigate this natural disaster.
Now that the damage has been done, it is of little value to check water lines, or the structural efficacy of buildings, or the soundness of roads and bridges, or who to blame.
What matters most is that we plan and construct a better future, informed by the lessons of the past. The declaration of a national state of disaster provides the regulatory framework to access a big chunk of the necessary funding the government needs to deploy, to help fix everything properly, once and for all. The private sector must do its share, and signs of that willingness are already evident.
Destroyed spirit
Events in KwaZulu-Natal are a case study of what could happen in practically any sphere of economic or social life in SA, depending on the extent of our preparedness. At the crux of the matter is a comparison of the cost of prevention versus the cost of repair and reparation. It is inevitably more expensive to repair. The lack of infrastructure maintenance (roads, rail, electricity, water) will come back to bite us in multiples of what the pay-as-you-go cost would’ve been. We all know this principle and have experienced it personally.
The logic doesn’t only apply to physical assets. The cost of not investing in human capital will have long-term consequences far worse than having to build or replace a bridge or road. There are no replacement parts for destroyed human spirit and endeavour.
Social rescue (like we have now) will cost many times what social development would have. Enabling individual economic independence is far more valuable than funding its absence. The notion that a dependent nation is a subservient one couldn’t be further from the reality that we can all see coming towards us. Social development starts at age six, not 66.
What is required is a fundamental mindset shift away from consumption in the present to investment in the future. It is nearly too late, and practically impossible for so many to even imagine more sacrifice, but we have no choice.
We need tangible evidence of incremental progress, not dreams of a grand future. We will have to rebuild KwaZulu-Natal brick by brick, on solid foundations, gathering from among us our best experts — from quantity surveyors and social workers to financial experts — to work with a resolve and common purpose last felt long ago. Elaborate rules and structures must be set aside for the sake of pragmatic, informed decision-making and actual implementation. Value for money, not the Public Finance Management Act.
We had better spend the money wisely, and make sure it all ends up in the right place.
• Barnes, a former SA Post Office CEO, has had more than 30 years’ experience in various capacities in the financial sector.
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