FLOYD SHIVAMBU
THE EFF will march to Parliament today to protest against the ill-thought out decisions to seek financial help from the International Monetary Fund (IMF) and the World Bank.
The decisions will, in the long term, entangle South Africa in a fiscal and policy milieu that would make it impossible to embark on policies that seek to ensure broad-based distribution of wealth, and also limit the government’s capacity for social spending.
A cursory look at the history of the countries that got entangled in IMF and World Bank loans shows that the loans are bad for developing countries, in particular for countries beset with inequalities and huge backlogs in the provision of social services such as universal health care, education and with unemployment rates as high as what we have in this country at the moment.
South Africa, despite her neoliberal policy inclinations over the past 28 years, has resisted approaching these two institutions because of the fear that doing so would inhibit the country’s ability to make own policy decisions. The decision to embrace the IMF and the World Bank indicates that the country has thrown caution out of the window, and is now willing to be a slave to policy prescripts imposed from elsewhere.
In July, 2021 the National Treasury announced that South Africa had secured $4.3 billion (R65.1 billion) from the IMF.
Then finance minister Tito Mboweni asserted that this loan was not going to surrender our sovereignty to the IMF, and that it came at very low interest rates.
He further indicated that this money was part of R95bn that the government sought from global multilateral institutions to boost the country’s response to the Covid-19 pandemic. In January, the National Treasury further announced that the country had secured $750 million from the World Bank to further strengthen the country’s capacity to deal with the Covid-19 pandemic. At the time, the director-general of the National Treasury, Dondo Mogajane, indicated that this was needed for “addressing the immediate challenge of financing crucial health and social safety-net programmes to develop our economic reform agenda to build back better”.
This was in addition to the R5bn borrowed from the African Development Bank and the R16bn from the New Development Bank. The government is using the pandemic as an opportunity to further entrench their neoliberal reforms, and hand over South Africa to colonial Brenton Woods’ institutions such as the World Bank and the IMF.
We do not need to go far to see demonstrable evidence of the deleterious impacts of the World Bank and IMF-imposed economic structural-adjustment programmes that are always tied to loans from these institutions.
The Zimbabwean economy was growing at a rate of 3.3% in the first decade of independence. The government had managed to reduce absolute poverty from 75% of the population in 1985 to about 40% in 1989. During the same period, incidences of extreme poverty were reduced from 31% to 16%. In the same period, Zimbabwe was making huge investments in education and health provision in the country.
Towards the end of the 1980s, as a result of both internal and external pressures, Zimbabwe moved towards adopting structural-adjustment programmes which were conditions for getting loans from these multilateral institutions.
These adjustment programmes were adopted by the government of Zimbabwe in 1991. They entailed the abandonment of the highly interventions posture on the economy that the Zimbabwean government had adopted since independence, and surrendered the fate of the economy and that of Zimbabweans to the unseen hand of the market. The consequences of that decision are still being felt in Zimbabwe to this day.
The agricultural sector, which was previously the bedrock of that economy was collapsed, the ability of the state to provide solutions to education and health challenges was severely limited, and the result is the Zimbabwe we see today.
The popular excuse that Zimbabwe was collapsed by the fast-track land reform programme is a lazy excuse for covering up the devastating failures of the IMF and World Bank-imposed policy prescriptions on developing countries more generally. While there is no longer overt talks of structural adjustments, loans from the World Bank and the IMF inadvertently force countries to adopt almost unregulated free market economies.
The type of economic policies that would result from entanglement with the IMF and World Bank loan would be devastating for this country. We have already seen efforts by the government to surrender its developmental role to the invisible hand of the market.
Attempts to privatise energy generation and distribution, negating the historical role of Eskom in the country’s economy, the almost complete attempt to hand over South African Airways to private individuals, and the general erosion of the role of the state in catalysing and sustaining growth are all part of this grand plan by the neoliberal-oriented and colonially controlled government of the ANC. The result of this would be a dramatically reduced ability to solve almost all of our problems.
The country would not be able to industrialise as much as it should in order to create jobs, and this will in turn lead to even more unsustainable levels of unemployment.
The absence of any social control over the processes of production and distribution will lead to the predominance of economic transactions that are not geared towards resolving our social and economic problems. We will see the consequences of the IMF and World Bank-imposed structural-adjustment programmes almost immediately.
The state will no longer be in a position to invest heavily in social services; there would be a dramatic decrease in real wages; the privatisation of key institutions would hand over the determination of access to key services to private institutions, whose interest is merely to make profit. South Africa would have squandered any opportunity to determine the course of her own development.
These efforts by Cyril Ramaphosa must be resisted at all costs.
Floyd Shivambu is deputy president of the Economic Freedom Fighters (EFF), and chief whip of the party in Parliament.
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