South Africa was granted an emergency $4.3 billion (R70 billion) loan from the IMF yesterday, which has already come under immense scrutiny regarding repayments, conditions and corruption.
The loan from the International Monetary Fund (IMF) was sought by the government of South Africa in an effort to relieve pressure on the economy from the COVID-19 pandemic, with millions of jobs lost and financial strain burdening its citizens, rich and poor. The repayments on the loan will only begin in 2023. It will be paid back over 3.5 years at an interest rate of 1.1% and the lump sum will be deposited into the South African Reserve Bank on Wednesday, according to Bloomberg.
“The facility is the country’s maximum entitlement under its special drawing rights with the IMF. It is payable over 3.25 to five years at 1.1% interest. It has to be repaid in eight equal instalments, the first of which is due at the end of 2023,” Montfort Mlachila, the Washington-based lender’s senior resident representative in South Africa, said in an interview.
Neo-liberal & neo-colonial conditions
However, the procurement of the loan has been met with a great deal of criticism from political parties, as well as ordinary citizens on social media.
EFF spokesperson Vuyani Pambo lamented the deal as “the biggest political blunder” in South Africa’s history.
“The loan from the IMF is in addition to a loan of R5bn from the African Development Bank and the R16bn loan from the New Development Bank. In total, the government has borrowed more than R90bn with 77% of the borrowed money coming from the IMF. This is the biggest political blunder in the history of South Africa. Loans from the IMF are always neo-liberal and neo-colonial conditionalities and South Africa will not escape from this reality,” he said, according to IOL.
And, in fact, IMF loans to African nations have all followed the same neocolonial trends, undermining nations’ sovereignty with particular conditions that are associated with loans like these, which often force governments to alter foreign policy and trade negotiations – an enormous factor in the disastrous state of the African continent, in general.
Geordin Hill-Lewis, DA Shadow Minister of Finance, has claimed that the IMF loan will be a watershed moment for South Africa and that the ANC led government must be completely transparent about the process.
“This is the first time since before 1994 that we have had to resort to IMF borrowing and is a profound signal of the frailty of our economy following years of mismanagement, bad policy and corruption,” he said.
“It is essential that the National Treasury is completely transparent about the disbursement and use of this loan as well as all COVID-19 relief funds.”
However, Mlachila insists that the government will be free to use the funds for the appropriate purposes.
“The government is entirely free to use it as it sees fit,” Mlachila said. “Obviously, we would like the government to use it for appropriate purposes, including in the direct fight against COVID-19 in terms of the health interventions as well as other economic measures to reduce the impact of COVID-19 on people’s livelihoods and to preserve jobs.”
The battle against corruption
Another issue is the rampant corruption that South Africa faces, which stretches back until the earliest days of the ANC rule over post-apartheid, democratic South Africa, all the way back to the Arms deal which involved former President Jacob Zuma and Schabir Shaik. The latter went to prison after being found guilty in the trials that followed, while the then-Deputy President Zuma got away scot-free. Zuma’s corruption continued well into his presidency, where he was at the heart of the Nkandla scandal, in which his home was upgraded to a Mall-sized compound, as well as the State Capture at the hands of the Gupta family.
The current president, Cyril Ramaphosa, has not been overseeing the cleanest administration either, with the Venda Building Society (VBS) scandal – a corrupt operation spanning back almost 40 years – coming to a head during his term in office, while the Zondo Commission (the commission of enquiry into the aforementioned State Capture) is still yet to make a single arrest.
Even during the State of National Disaster, under which South Africa has operated since March in response to the COVID-19 outbreak, there have been accusations that COVID-19 relief funds have been misallocated. While the poor struggle and starve throughout the country, government rent-seekers have looted a reported R4.8 million. Among several criticisms lodged at Ramaphosa, his failure to keep corruption at bay and even his creation of an SIU to investigate the misallocated funds, this may be the most prominent.
It is therefore clear why South Africans are hesitant to trust the government’s decision to borrow such an enormous amount from international lenders even at this time of dire need in the country.