Anger and concern over SAs R70bn IMF loan. Picture: Tim Sloan/AFP/Getty Images

NEWS

Saftu general secretary Zwelinzima Vavi said on Wednesday that the federation notes with deep concern and anger that the IMF issued communication confirming that it had lent South Africa $4.3 billion (R70 billion) following the acceptance by government of all conditions stipulated by the IMF.

In terms of alternative solutions to IMF funds, Saftu had looked at the possibility of quantitative easing, higher taxes on corporations and the rich, tighter exchange controls, a crackdown on illicit financial flows and other strategies to address the debt load.

Vavi said the IMF conditions were based mainly on so-called fiscal consolidation made in the supplementary budget in June 2020, including expenditure cuts of R230 billion over the next two years, a commitment to freeze public sector wages for 2020/21, and a plan to put an artificial ceiling on the debt-to-GDP ratio.

These were policies that the union federation had already rejected, he said, adding that this policy platform is exactly what has landed us where the country is today, at an economy that moves from years of stagnation to recession and now directly into a depression.

He said this included a record-breaking unemployment rate for any industrial society; shockingly high levels of poverty; a society that has become the most unequal in the whole world; structured racial and gender oppression; and ecologically catastrophic policies.

Vavi said those who celebrated the IMF loan and conditions were the beneficiaries of the status quo.

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They will not be affected by the massive cuts in state expenditure as they long ago contracted out of the chronically understaffed and underresourced public healthcare system, public education, public transport and even public policing, given that they have their own private security arrangements.

They will certainly be directly and indirectly affected though because deindustrialisation, rising social anger and declining state sovereignty will heighten this countrys contradictions between classes, races and genders. If some right-wingers believe that the IMF will sort out this country via shrinking the state then this is a very short-term, self-destructive way of thinking.

He also said that governments economic stimulus package was wholly inadequate from the beginning. Government claimed that it had made available a R500 billion stimulus package when in reality it had only released R170 billion in new money, which Vavi says was a pathetic 3.4% of GDP.

The rest of the funding will come at the expense of other service delivery priorities, as well as deep cuts in state workers salaries. We have argued that government must at least put aside 15% of the GDP to intervene, which would be more than R1 trillion, Vavi said.

He said that government was advised against the policies adopted by even the most conservative governments including the UK and US.

Today government is unable to protect industries such as liquor, tobacco and tourism which had to be closed down to curb the spread of the virus as it simply has no resources to protect jobs and firms.

He cited the appalling and unprecedented economic and human catastrophe exposed by the Coronavirus Rapid Mobile Survey.

Vavi said the report, which was published on July 15, revealed a net loss of 3 million jobs between February and April.

One in three income earners in February did not earn an income in April, which translated into almost immediate job loss when lockdown was declared. 47% of respondents reported that their household ran out of money to buy food in April, the survey said.

Vavi said the IMF loan would not reverse but exacerbate the catastrophe.

Saftu called for full transparency regarding all the loans provided by international financial institutions.

We do not understand the rationale for hard-currency borrowing, which in 2020 is expected to total $7.5 billion from international financial institutions, including the World Bank, the New Development Bank and the African Development Bank.

The economy has achieved a current account surplus [it is usually 4%+ of GDP in deficit] thanks to the crash of imports and lack of profits flowing back to multinational corporations, Vavi said.

He said the $52 billion in current SA Reserve Bank foreign reserves suggested that South Africa was not short of dollars.

In other words, it is bizarre fiction for the IMF to argue that it must make this loan to South Africa to meet the urgent balance of payment needs stemming from the outbreak of the Covid-19 pandemic when even the top Treasury official responsible for international finance admitted to Goldman Sachs in a conference call [on April 26] that finding additional funding is not urgent.

He said the cost of a dollar loan was much higher than locally sourced credit from liquid financial markets since South Africa must repay the loan in dollars even though we can expect the rand to continue its decline in coming months and years, thus making the loan much more expensive in real terms.

Political Journalist

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