SAFTU and Cry of the Xcluded REJECTS IMF-STYLE CONDITIONALITIES MASQUERADING AS INFRASTRUCTURE REFORM
The South African Federation of Trade Unions (SAFTU) and Cry of the Xcluded, rejects the $1.5 billion (approximately R26.5 billion) World Bank loan granted to the South African government. We consider it a dangerous Trojan Horse package, like so many others from the World Bank and International Monetary Fund (IMF), harming South Africa’s poor and working people, our economy and our environment. Even basic policy oversight is harmed, as the Bretton Woods Institutions secretively formulate their Washington-Consensus dogma and provide obscure marching orders to Treasury without genuine public debate or transparency. Three IMF papers provided to Treasury just as the ultra-chaotic 2025 budget process began, ordered ‘fiscal consolidation’ more than 100 times.
In this case, we worry especially about the World Bank accelerating the commercialisation and even privatisation of state-owned enterprises (SOEs) and liberalisation of key economic sectors. This process has been disastrous for many institutions and for our economy dating to 1989 when Iscor was sold, with IMF support. The wreckage left by its subsequent owner ArcelorMittal is known to all, especially milking massive subsidies and causing terrible pollution that has killed thousands over the past quarter century.
The other SOE privatisation and commercialisation victims include millions of land-line customers of Telkom, SAA (when a Swiss airline co-owner collapsed), Denel (with its Rheinmetall German co-owners which supply Israel’s genocidaires), Transnet (thanks to excessive private outsourcing, e.g. of corrupt locomotives) and now the biggest prize, Eskom. Its 2010s move to privatised solar and wind generation led to much higher costs (including 30% mark-up to foreign owners), incoherence in transmission infrastructure, and ultimate a decisive failure to provide what organised labour has always demanded: state-owned, worker-managed and community-controlled renewable energy of a sufficient service standards that households, small businesses and labour-intensive industries are empowered with carbon-free electricity. The more that our SOEs are salami-sliced by vulture privatisers, the more corruption gets into the system.
This new World Bank loan is not yet available to the public on the Bank or Treasury websites. But publicity suggests it is being framed as a tool to support “structural reforms” in energy and freight logistics, the loan is in fact a mechanism to deepen the neoliberal offensive. It uses debt to bind South Africa to a model of deregulation, deindustrialisation, and elite enrichment that has already left millions unemployed, excluded, and impoverished. If these are mainly advisory functions, the loan should not be denominated in U.S. dollars – but instead in Rands (which is mainly what should be spent on improving SOEs since in so many cases there are minimal imports) – and because our currency tends to decline even against the fast-crashing US$ (today we are R17.75/$, a massive drop from R6/$ fifteen years ago), it is an extremely expensive way to borrow.
South Africa’s foreign debt is already over $170 billion so we fear that in the wake of appalling Bank and IMF lending over the past 75 years – as discussed below – there is now an even greater Odious Debt that our and future generations must pay. The corrupt lending for the worst single case of state-capture – the $3.75 billion in Medupi financing by the Bank in 2010 even though its leaders knew that Hitachi was being accused (and later successfully prosecuted) of Foreign Corrupt Practices Act violations – is still being repaid in spite of that project’s failure.
Behind the Euphemisms: A Neoliberal Agenda
According to Treasury and the World Bank, this loan will:
• “Modernise” SOEs
• “Open key sectors to competition”
• “Boost infrastructure delivery”
• “Support a shift to a low-carbon economy”
But in plain language, this means:
• Privatisation through public-private partnerships (PPPs)
• Opening strategic public infrastructure to profit-seeking corporations
• Outsourcing and job losses at Transnet
The World Bank has made 25 major mistakes in South and Southern Africa since it began lending in 1951. Before taking on new loans, we need to be fully conscious of these mistakes, and to join African civil society and courageous states – perhaps Burkina Faso and Senegal – in carrying out debt audits, and demanding cancellation. The Bank’s first five mistakes occurred during apartheid:
- The Bank’s $100-million in loans to Eskom for building coal-fired power plants from 1951 to 1967, in the process supplying only white people and businesses with electricity, for which all South Africans paid the bill;
- The Bank’s point-blank refusal to heed a United Nations General Assembly instruction in 1966 not to lend to apartheid South Africa;
- IMF apartheid-supporting loans of more than $2-billion between the Soweto uprising in 1976 and 1983, when the US Congress finally prohibited lending to Pretoria;
- Bank loans for Lesotho dams, which were widely acknowledged to “sanctions-bust” apartheid South Africa in 1986, via a London trust; and
- IMF advice to Pretoria in 1991 to impose the regressive Value Added Tax, in opposition to which 3.5 million people went on a two-day stayaway.
Subsequently, lending and neoliberal policy advice by the Bretton Woods twins after 1994 have included:
- An $850-million IMF loan to South Africa in December 1993 that carried conditions of wage restraint and cuts in the budget deficit, which in turn hampered the transition to democracy;
- Bank promotion of “market-oriented” land reform in 1993-94, which established such onerous conditions (similar to the failed Zimbabwe policy) that instead of 30% land redistribution as mandated in the RDP, less than 1% of good land was redistributed;
- The Bank’s endorsement of bank-centred housing policy in August 1994, with recommendations for lowering housing subsidies, leading to smaller (and badly constructed) houses further from jobs and community amenities, than during apartheid;
- Bank design of South African infrastructure policy in November 1994, which provided the rural and urban poor with only pit latrines, no electricity connections, inadequate roads, and communal taps instead of house or yard taps;
- The Bank’s insistence that corrupt Lesotho Highlands Development Authority boss Masupha Sole stay in his job in December 1994 (six years after he began taking bribes from international construction companies), in a threatening letter to the Lesotho government;
- The Bank’s promotion of water cutoffs for those unable to afford payments, opposition to a free “lifeline” water supply, and recommendations against irrigation subsidies for black South Africans in October 1995, within a government water-pricing policy in which the Bank claimed (in its 1999 Country Assistance Review) to play an “instrumental” role;
- The Bank’s conservative role in the Lund Commission in 1996, which recommended a 44% cut in the monthly grant to impoverished, dependent children from R135 to R75;
- The Bank’s participation in the failed “Growth, Employment and Redistribution” GEAR policy in June 1996, through contributing both two staff economists and its economic model;
- The Bank and IMF’s consistent message to South African workers that their wages are too high and that unemployment can only be cured through “labour flexibility”;
- The Bank’s role, including research support and encouragement of municipal privatisation, in Egoli 2002, the plan to privatise and commercialise most Johannesburg municipal services;
- The Bank’s promotion of carbon markets, especially the Clean Development Mechanism scheme at Africa’s largest landfill, Bisasar Road in Durban, which by all accounts failed since the Bank not only reversed a 1994 ANC promise to the (black) community that the dump would be closed, but the price of the carbon credits collapsed in the 2010s to the point that the project was unviable as an emissions trading pilot;
- The Bank’s repeated commitments to invest, through its subsidiary, the International Finance Corporation (IFC), in privatised infrastructure, housing securities for high-income families, for-profit “managed healthcare” schemes, and the soon-bankrupt US-owned Domino’s Pizza franchise;
- A $150-million debt/equity commitment to Lonmin at Marikana, which the IFC bragged was the “largest investment to date in sub-Saharan Africa”, but which contributed to financial conditions whereby the firm refused to pay a living wage or build 5,000 promised houses (only three were built), leading to labour and social unrest, and then the 2012 massacre of 34 striking mineworkers;
- The $3.75-billion loan from the Bank to Eskom for building Medupi in 2010, even though from early 2008 it was widely known that Hitachi had corrupted the ANC through the Chancellor House “success fee”, a bribe prosecuted under the US Foreign Corrupt Practices Act in 2015 but which the Bank chose to ignore that year (even when pressed to comment by the DA);
- The Bank’s pro-austerity research function in 2014, which led to a re-estimation – using extremely dubious methodologies – of the South African Gini Coefficient (from 0.78 down to 0.59), with the message that the South African state was, since 1994, effectively tackling inequality and hence should not spend more on social programmes;
- The IFC’s 2016 investment of $107-million in Net1 (i.e. 22% ownership) which codified the firm’s extremely aggressive predatory activities, degenerating into such extreme abuse that its subsidiary Cash Paymaster Services was sued for corruption and went into receivership in 2020 owing the SA Social Security Agency $100-million, a process which – in its 2022-26 SA Country Partnership Framework assessment of prior objectives in “financial inclusion” – the Bank celebrated as “mostly achieved”;
- The IFC’s 2019 $2-million financing for Transnet to set up a liquefied natural gas plant in Richards Bay, in spite of such gas being 85 times more potent than CO2 as a greenhouse gas over 20 years;
- Repeated 2020-22 loans by the IMF and Bank to South Africa of more than $5-billion, for “Covid relief” – in spite of widespread procurement corruption within the health ministry, the state’s need for local-currency (not hard-currency) finance given nearly all new expenses (e.g. the Social Relief of Distress grant) were non-import related and could be paid for in rands, and structural-adjustment conditionality that by October 2020 caused Treasury to reimpose fiscal austerity;
- The Bank’s $500-million Just Energy Transition Partnership loan for decarbonising the Komati plant in late 2022, even though Eskom has announced an intention to convert the defunct coal-fired power plant to gas (far more damaging than CO2), likely drawn from northern Mozambique’s “Blood Methane” in a conflict zone (6,000 deaths, one million people displaced) in which the Bank also invests, and even though no local consultation with workers and communities was done by the Bank and Eskom; and
- The consistent failure of Bank and IMF “structural adjustment programmes” in southern Africa since the 1980s and the stubborn refusal by the Bank and IMF to substantively cancel debt owed by our impoverished neighbours.
A quarter century ago, South Africans were at lead of a movement to shut down the World Bank, with the late poet Dennis Brutus starting a ‘World Bank Bonds Boycott’ that persuaded the city councilors of San Francisco to sell their Bank securities. In October 2023, a wide-ranging civil society coalition protested the World Bank for the reasons above. In 2025, we need to revive that spirit, especially because the SA Treasury has shown how exceptionally hostile it can be to poor people through the attempted VAT attack and through spending cuts – because we can also trace these reactionary policies and budget strategies to the World Bank and IMF.
It is time they are closed and replaced with something more in keeping with John Maynard Keynes’ original 1944 vision, of a world economy not based on dollarisation and trade blackmail power – but instead on the need for economic justice.
A Statement was issued on behalf of SAFTU by General Secretary Zwelinzima Vavi.
For more details, contact the National Spokesperson at:
Newton Masuku
066 168 2157
Newtonm@saftu.org.za
