The AIDC notes with great concern, the third secretive loan agreement that President Cyril Ramaphosa has signed on behalf of South Africa in Egypt. This follows the Glasgow deal struck in 2021. The ongoing lack of transparency and accountability by our government regarding these loans that will amount to $8.5 billion is unacceptable. We know little about the terms and conditions, duration, interest rates etc of these deals. There was no mention or focus on this deal in the MTBPS 2022. What changed recently that prevented the Executive from at least informing Parliament?
We now have the third foreign loan signed in a short time. This one is from France and Germany and amounts to €600 million (currently R10,6 billion). South Africa also received a $497 million World Bank loan in October to repurpose the Kumati coal fire plant. In January, the government had already taken a $750 million loan from the World Bank anchored in a joint ‘Country Partnership Framework’ that dictates the austerity policy of the Treasury.
Less than 3% of the $8.5 billion climate finance deal being offered to South Africa come in the form of grants, the rest being concessional loan, commercial loans and investment guarantees.
The alleged purpose of the new loan is to assist South Africa’s transition to a low-carbon economy and increase the production and provision of renewable energy. In reality, the Just Energy Transition partnership and the Glasgow deal are a means to advance the increased privatisation of SA’s energy sector, surrendering the country’s energy sovereignty to the dictates of the market.
Moreover, the increase in debt denominated in foreign currency by the government, State Owned Enterprises (SOEs) and private corporations is a serious concern. In June, South Africa had a $170 billion large foreign debt according to the Reserve Bank. We can anticipate more expensive repayments and debt service costs if the rand depreciates in value relative to the dollar. More budget cuts for health, education and social development expenditures, are the government’s go-to instrument. SA debt levels are already being used as the reason to justify the harshest austerity in post-Apartheid South Africa.
We should prioritise borrowing domestically to invest in a transition to a low-carbon economy. The Government Employees Pension Fund (GEPF) with more than R2.3 trillion in accumulated reserves is well placed in this regard. It can redirect large levels of speculative investment in the JSE into more sustainable investment in the real economy towards re-industrialising the South African economy.
This can ensure that we combat climate change and address mass structural unemployment. We also can raise additional resources by increasing the progressivity of the South African tax framework.
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