The South African Federation of Trade Unions (SAFTU) is concerned that the $750 million (R11.3 billion) loan Treasury has just taken out from the World Bank represents a mashonisa preying on a desperate borrower.
The loan is supposedly “to protect the poor and vulnerable from the adverse socioeconomic impacts of the Covid-19 pandemic, and to pave the way for a resilient sustainable recovery.” But on closer examination, as austerity bites us and as corruption erodes our Covid-19 funds, this loan is aimed at nothing of the sort, and will result in a major compromise to the economic policy sovereignty of this country.
SAFTU rejects this World Bank loan, as we did the sister International Monetary Fund’s $4.3 billion loan in mid-2020. We believe not only that South African society should reject it today, but in future, so should a genuinely democratic government, one which would logically consider the whole World Bank portfolio in South Africa as “Odious Debt,” dating to 1951 when it was an unabashed apartheid lender.
Since the economy witnessed an unprecedented trade surplus of close to R500 billion in 2021, the World Bank’s hard-currency loan is not necessary, as reserves are the highest in history. And in any case, South Africa’s foreign debt is already far too high. After inheriting $25 billion of apartheid-era foreign debt, the period 1994-2007 was relatively conservative for overseas borrowing, with only $10 billion more added. But then Finance Minister Trevor Manuel and his successors threw caution to the wind and put future generations into a massive foreign debt trap.
Last month, the SA Reserve Bank’s Quarterly Bulletin announced (measuring in dollars), “South Africa’s total external debt increased from $164.7 billion at the end of March 2021 to $170.6 billion at the end of June.” Much of that – including the World Bank’s $3.75 billion loan (it’s largest ever) to Eskom to pay mainly for Hitachi boilers for Medupi – is highly dubious, given that the Bank already knew in 2010 that this represented a corrupt, fraudulent deal with the ANC’s Chancellor House funding arm, for which Hitachi was prosecuted in the U.S. and in 2015 paid a R300 million fine.
In early 2021, Finance Minister Tito Mboweni declared after frustrating negotiations on what appears to be a very similar Covid-19 loan, “If the World Bank thinks it can dictate policy, let them keep their cents I’ll just issue bonds here at home.”
On this sole occasion, we salute his attitude, because this loan is inappropriate given Treasury’s alternative for fundraising: “here at home.” And the loan won’t be cheap once the likely Rand currency depreciation is considered; it will indeed be far more expensive than easily-acquired domestic borrowing. Two points should be obvious:
• We need more local borrowing to finance our local deficit and increase appropriate state expenditure to meet basic needs, such as the long-overdue Basic Income Grant, for which we pay the South African recipients in Rands, not in US dollars, so we need a local not foreign currency denominated loan.
• And we need to mop up more of the highly-speculative financial flows – e.g. worker pensions – that are essentially wasted within the Johannesburg Stock Exchange, luxury property sector and other high-return but high-risk financial casinos.
In the context of the raging austerity, cemented into the IMF’s 2020 loan conditions, SAFTU refuses to believe that this loan will “protect the poor and vulnerable from the adverse socio-economic impacts of the Covid-19 pandemic.” We are also very concerned that far too much borrowing that should have been directed towards social welfare has instead been looted through corruption, by a health minister who was one of President Cyril Ramaphosa’s closest allies, and by many other politicians, officials and crony capitalists.
Therefore, we reject this loan because it is compromising the country’s economic sovereignty, and will not benefit the people in the context of austerity and corruption.
There is, now, an urgent need for the working class to reorganise itself and aim for power, if we are to rescue the country from the ANC’s debt trap. The protests we anticipate during Finance Minister Enoch Godongwana’s budget speech on February 23 are one opportunity to express anger, that he is allowing our country to continue succumbing to the neoliberal dictates of international financial institutions.