Help fight Covid-19 by rejecting International Monetary Fund (IMF) and World Bank Loans!
More than 70 organisations including trade unions and mass based popular organisations demands that government reject any International Monetary Fund (IMF) and World Bank Loans!
The past 25 years of both inadequate levels of public expenditure (some as a result of waste, incompetence or corruption) and unimaginative policymaking have resulted in untenable levels of unemployment, inequality, and precarity for the majority of South Africans.
Essential services like healthcare and basic infrastructure, including sanitation, have seen a consistent decline in the quality and degree of provision. Government admits that only 44% of South Africans have a water tap in their houses. All of this leaves South Africa with no cushion against the Coronavirus outbreak and South Africa is in fact particularly vulnerable to this pandemic – socially and economically.
Under the leadership of Finance Minister Tito Mboweni, the Treasury is now preparing the public for an International Monetary Fund (IMF) or World Bank loan. It is neither required nor desirable.
It is not required because there are several local alternatives for raising the necessary finances to deal with the immediate priorities of the State to fight the pandemic and get the economy out of its current crisis. An IMF or World Bank loan, even if contracted at what appears to be concessionary interest rates, poses great dangers to SA’s economic sovereignty and will permanently lock the country into the very conservative economic policies that have contributed to the current socio-economic problems in South Africa, including the unemployment crisis and growing poverty.
IMF / World Bank conditionality of austerity, monetarism, privatisation, trade liberalisation, financial liberalisation, regressive tax policies, etc. (measures all supported by Mboweni and National Treasury) have been proven by the pandemic to be detrimental to our society and economy. Governments all over the world had begun abandoning austerity even before the Covid-19 pandemic to stimulate their economies. In order to fight Covid-19, they are now implementing massive fiscal stimuli to improve their public health system and resuscitate their collapsing economies.
Governments are going against trade rules to rapidly produce the health equipment and medicines needed to fight the virus. The “free market” is being suppressed so that private hospitals are nationalised in Italy, Spain and other European countries, redirected by government to meet public health needs and private sector factories redirected to produce vital medical equipment.
Thus, we cannot accept the South African Treasury going to the IMF or World Bank for loans because they would be locking our economic policy into a so-called “neo-liberal” and conservative policy prison for generations to come.
This is precisely the economic policy that is currently undermining a strong enough response to the pandemic and working against the measures taken by other government departments to stop the spread of the virus and to save lives. An IMF or World Bank loan would be an easy excuse for National Treasury to continue with its austerity agenda.
Economic policies (including fiscal, industrial, monetary or international) will become immovable and our sovereignty further compromised. Our foreign debt will condemn future generations to a miserable life. South Africa would be unable to change its economic policy course at a time when most countries and a great many prominent mainstream economists have rejected austerity and now strongly support the use of expansionary fiscal and monetary policies to address economic challenges.
Further, if these loans are denominated in foreign currency, they are only likely to get increasingly expensive since the South African Rand is expected to continue declining against the U.S. dollar. Already the R/$ exchange rate has fallen from R14 in January to R19 in April – there is no reason to anticipate any bounce-back given the worsening world financial meltdown (and the flight to the alleged ‘quality’ US$ by financiers).
The caution against foreign borrowing must be general, including borrowing from the New Development Bank. We need the currency reserve to pay for medical equipment and for dealing with the emergency situation. Especially since South Africa’s foreign currency reserve has already been depleted by speculative outflows.
Therefore, we call on government to stop further negotiations with these institutions and to explore alternative means of financing the response to the pandemic, addressing the needs of our people in this crisis.
Much greater fiscal resources must be made available, in part through the loosening of monetary policy. The strategies that follow should include:
- Placing a temporary moratorium on government and SOE foreign debt repayments, and ensuring that any profit and dividend payments due to transnational corporations are made in local currency for local reinvestment;
- Annulling loans and contracts of State enterprises, agencies and government departments associated with corruption (i.e. odious debts and contracts, including the World Bank’s 2010 US$3.75bn loan to Eskom);
- Raising capital from government funds under the management of the Public Investment Corporation (Government Employees Pension Fund, Unemployment Insurance Fund, etc);
- A moratorium on dividend pay-outs by corporations on the Johannesburg Stock Exchange (JSE), and a redirecting of dividends to the COVID-19 fund in response to crisis;
- Implementing a financial transaction tax with a progressive base so that major transactions are penalised and normal banking is considered a lifeline human right of all citizens;
- The SA Reserve Bank substantially reducing interest rates and putting in place measures to prevent speculation on the Rand via exchange and other capital controls;
- Easing pressure on the balance of payments and reducing opportunities for base erosion and profit shifting by restricting cross border payments of dividends and interest on inter-company loans, particularly to companies in tax havens;
- With respect to illicit financial flows and corporate profit shifting, prohibit all payments of “sales commissions”, “management fees” and other payments to related parties in tax havens; and
Furthermore, the SA Reserve Bank could also directly issue bonds to government.
Finally, it is critical that all financing must be transparent and must not be accompanied by strings attached, conditionalities or proposed structural reforms
- 360 Degrees – Environmental organisations
- Abahlali baseFreedom Park
- Abahlali baseMjondolo (AbM)
- Africa Unite
- African Centre for Biodiversity
- Alternative Information & Development Centre
- Amadiba Crisis Committee
- Assembly of the Unemployed
- Association of Mineworkers and Construction Union (AMCU)
- Baduli baDiepkloof
- Black Sash
- Botshabelo Unemployment Movement
- Centre for Economic Development
- Commercial, Stevedoring, Agricultural and Allied Workers union (CSAAWU)
- David Fryer, Senior Lecturer, Department of Economics and Economic History, Rhodes University.
- Democratic Municipal and Allied Workers Union of South Africa (DEMAWUSA)
- Democratic Nursing Organisation of South Africa
- Documentary Filmmakers Association
- Economic Justice Network
- Extension 24 Unemployment Structure
- Extinction Rebellion South Africa
- Fighting Inequality Alliance
- Gauteng Housing Crisis Committee
- Hlalamnandi community movement
- Independent Producers Organisation
- International Labour Research Information Group
- Inyanda Land Rights Movement
- Keep Left
- Khanya College
- KZN Subsistence Fisherfolks
- MACUESE- MACADEFO
- Meadowlands Community Forum
- Michael Nassen Smith, Assistant Lecturer, UCT Economics and PhD candidate at York University
- Middelburg Employable People’s Structure (M.E.P.S)
- Mining Environmental Justice Community Network (MEJCON-Mpumalanga Highveld Region)
- Multiracial Business and Community Forum (MBCF)
- National Labour & Economic Development Institute (Naledi)
- National Public Service Workers Union (NPSWU)
- New Unity Movement
- Newtown Community Structure
- One Voice of All Hawkers Association
- Open Khanyisa Movement
- Orlando task team
- Oxfam South Africa
- Pietermaritzburg Economic Justice and Dignity Group
- Poor Flat Dwellers Association
- Progressive Community Movement
- Peoples Health Movement – South Africa (PHM-SA)
- Public Services International
- Publish What You Pay – South Africa
- Royal Forum
- Rural Womens Assembly
- Sekhukhune Environmental Justice Network
- South African Liberated Public-Sector Workers Union (SALIPSWU)
- South Durban Environmental Alliance
- Southern African Green Revolutionary Council (SAGRC)
- Soweto Electricity Crisis Committee
- Sukuma Sinqobe
- Thembelihle Crisis Committee
- Trust for Community Outreach and Education (TCOE)
- Ubunye Bama Hostele
- Unemployed People’s Movement
- Unemployed United Front (UUF)
- Voice of the Poor Concerned Residents
- Waterberg Environmental Justice forum
- Waterberg Women Advocacy Organisation
- Wentworth Development Forum
- Women in Mining