South Africa recently obtained a loan from China which President Cyril Ramaphosa says its details are still confidential. Why should the details of a loan to this country be made confidential when South Africa is portrayed as a democratic, transparent and accountable country? Transparency leads to accountability which are hallmarks of a democratic country. The ANC government should not take a loan and make details thereof after the fact. It is like putting the cart before the horse. Loans go with strings attached. The people of this country should study the conditions of the loan and accept or reject it before the government accepts it. It should not be the other way around.
What is the difference between what former President Jacob Zuma tried to do about the nuclear deal with the Russians and what the current President is doing regarding the Chinese loan to this country? Loans almost invariably have unacceptable conditions attached to them which is probably the reason Ramaphosa kept the details of the loan confidential. And why should a mineral-rich country such as South Africa borrow money from foreign governments?
I have been writing about the International Monetary Fund (IMF) and World Bank and development issues from 1989. There are two articles I wrote for Botswana’s weekly publication The Gazette in the first two weeks of November 1989. During that time most of these ANC guys were in exile preparing to return to South Africa as their leaders had been holding secret meetings with apartheid government officials and captains of industry. Those who were in Botswana must have read those critical articles about the IMF and World Bank.
In the early 1990’s when news made the rounds that the ANC leadership was going to borrow $850,000 from the IMF, I cautioned against such a move in the Sowetan. They were not yet in government yet they borrowed money from the IMF. They knew something that most of us didn’t know and, that is, they were going to form the next government. The election outcome, as I have argued before, was pre-determined which was the result of the secret deals.
On the 29th April 1996, I wrote an article which was published in the Business Section of the Sowetan in which I criticised the manipulation of the rand and the silly stories that attributed the strength and/or weakness of the rand to extraneous factors such as Nelson Mandela’s health. I questioned the relaxation of exchange controls and the removal of two-tier currency system.
In 1996 when the Growth, Employment and Redistribution (GEAR) was adopted, Cosatu leadership said it had mixed feelings until I wrote a critique of GEAR which was published in the New Nation of 16 August 1996.
In the late 1990’s early 2000’s, I wrote an article in the Sowetan criticising the IMF and World Bank. I also wrote a letter in the Citizen of 1st December 2009 criticising Eskom for taking a loan from the World Bank https://www.pressreader.com/south-africa/the-citizen-kzn/20091201/283055525506711
I repeated my criticism on 20 November 2011 in a Youth Web magazine in an article published under the headline, “South Africa and Eskom’s World Bank Loan” which is reproduced below.
SOUTH AFRICA AND ESKOM’S WORLD BANK LOAN
On the 14th November the Minister of Finance Pravin Gordhan, in the presence of a World Bank official and on behalf of the government of South Africa, signed for a R1.9 billion loan from the World Bank. The money is to be used for Eskom’s electricity generators. The loan is payable in forty years at 0.25% interest. A country that accepts a World Bank loan is required to enter into an agreement with the International Monetary Fund (IMF). The World Bank and IMF work hand in glove.
It is unbelievable that in the 21st century South Africa can borrow money from the World Bank when there are known problems associated with amortisation and interests. The World Bank most probably insisted on land as collateral. World Bank loans are used to ensnare countries into an unending debt. The World Bank and IMF loans employ conditionalities which involve highly controversial requirements such as austerity or privatisation of key public services. Conditionalities imposed on borrower countries are known as Structural Adjustment Programmes.
These Bretton Woods institutions often attach loan conditionalities based on what is termed the ‘Washington Consensus‘, focusing on liberalisation of trade, investment and the financial sector deregulation and privatisation on nationalised industries. Often the conditionalities are attached without due regard for borrower countries’ individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries. IMF conditionalities additionally result in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. Issues of representation are raised as a consequence of the shift in regulation of national economies from state governments to Washington-based financial institutions in which most developing countries hold little voting power. The IMF packages have also been associated with negative social outcomes such as reduced investment in public health and education.
Other observations about the World Bank financed projects include the following: (1) finance of construction of hydro-electric dams which resulted in displacement of indigenous peoples of the area; (2) the World Bank’s undemocratic governance structure which is dominated by industrialised countries is biased in favour of the private sector; (3) the World Bank continues its financial support for heavily polluting industries which include coal power; (4) the World Bank working in partnership with the private sector undermines the role of the state as the primary provider of essential goods and services, such as healthcare and education, resulting in the shortfall of such services in countries badly in need of them; (5) the World Bank’s private sector lending arm – the International Finance Corporation (IFC) – has also been criticised for its business model, the increasing use of financial intermediaries such as private equity funds and funding of companies associated with tax havens; (6) the World Banks’ views and prescriptions undermine eliminate alternative perspectives on development; and (7) the World Bank and IMF governance structures are dominated by industrialised countries.
Decisions are made and policies implemented by the leading industrialised countries of the G8, excluding Russia, because they represent the largest donors without much consultation with poor and developing countries. It has been reported that the Eskom generators which the World Bank loan is going to finance are going to be built by Hitatchi. Hitatchi was awarded a lucrative tender to build those generators by the ANC government. At the same time the ANC’s investment arm and fund-raising outfit Chancellor House is a shareholder in Hitatchi. It means the ANC has borrowed money from the World Bank to use in the tender it has awarded itself. Where is Cosatu and the so- called communists, some of whom are cabinet ministers? The PAC’s rejection of this dubious World Bank loan will set it apart from political parties such as the DA and demonstrates which political party represents the aspirations of the African people and that it has the interests of the poor at heart.