Deputy finance minister defends US$1.5bn World Bank loan amid EFF concerns

The government’s decision to borrow US$1.5 billion (about R27bn) from the World Bank will help grow the economy and not undermine South Africa’s sovereignty.

Deputy Finance Minister Dr David Masondo on Tuesday defended the loan, assuring the country that borrowing in itself is not bad.

“The question is, what are you borrowing for? (We are) Borrowing for infrastructure to grow the economy. The second issue is whether you will be able to service your debt,” he said.

On Monday, the National Treasury announced that the loan will help unlock key infrastructure bottlenecks, particularly in the energy and freight transport sectors, and also enable inclusive economic growth and foster job creation.

The EFF expressed serious concerns that the National Treasury has borrowed billions in the name of economic reform and stability but failed to ensure that this debt translates into jobs, industrial growth, or public infrastructure benefits.

The party complained about the rising trend of foreign-denominated loans, particularly when there is sufficient liquidity in the domestic financial market and alternative monetary policy interventions that remain unexplored.

“These loans appear politically motivated and are designed to entrench long-term conditions that will bind future governments and constrain sovereign policy space,” the EFF stated.

However, Masondo maintained that the loan sought from the World Bank is consistent with the government’s intention to grow the economy and there is nothing in the agreement that undermines the country’s sovereignty.

“We have always said, and that is what the RDP (Reconstruction and Development Programme) said, which is the founding policy document of the ANC and the (tripartite) alliance as a whole, which said that go and borrow money anywhere in the world as long as it’s cheap, does not undermine our national sovereignty,” he explained.

Masondo added that if the government borrows to aid economic growth, that is sustainable borrowing and debt.

Addressing fears that the Iran-Israel conflict could adversely affect the South African economy through increases in fuel prices, Masondo said the government was observing the events with serious concern.

“If there is going to be, as we have already seen, disruption of supply chains, the supply of oil, it will definitely reduce the amount of oil that is required by the world, including South Africa,” he explained.

Masondo said the government was very worried about the impact of the war that is going on in the Middle East and its consequence and impact on the supply chains.

“We know the laws of economics, where there is poor supply, under supply and the demand is high you will have the tendency of prices going up,” he said.

Masondo was speaking on the sidelines of the Supreme Audit Institutions Summit of G20 member states at Melrose Arch, Johannesburg.

He described the G20 as a crucial platform.

“If you have observed a number of decisions that are taken by the G20 become world decisions. They become decisions of the World Bank, IMF (International Monetary Fund) and other international institutions,” he said.

According to Masondo, if the country does not participate in such platforms it could mean being governed through policies and decisions in which it played no part in formulating.

“So our participation in the G20 provides a great opportunity for Africa, global south and developing countries to shape how we are governed in the world in order to avoid powerful countries dictating what Africa and other developing countries should do,” he added.

Masondo insisted that Africa and developing countries’ voices were very critical.

“We must continue to place the voice of developing countries and the continent in these multilateral institutions,” he said.

loyiso.sidimba@inl.co.za