On the 14th November the Minister of Finance Pravin Gordhan, in the presence of a World Bank official and on behalf of the government of South Africa, signed for a R1.9 billion loan from the World Bank. The money is to be used for Eskom’s electricity generators. The loan is payable in forty years at 0.25% interest. A country that accepts a World Bank loan is required to enter into an agreement with the International Monetary Fund (IMF). The World Bank and IMF work hand in glove.
It is unbelievable that in the 21st century South Africa can borrow money from the World Bank when there are known problems associated with amortisation and interests. The World Bank most probably insisted on land as collateral. World Bank loans are used to ensnare countries into an unending debt. The World Bank and IMF loans employ conditionalities which involves highly controversial requirements such as austerity or privatization of key public services. Conditionalities imposed on borrower countries are known as Structural Adjustment Programmes.
These Bretton Woods institutions often attach load conditionalities based on what is termed the ‘Washington Consensus‘, focusing on liberalization of trade, investment and the financial sector deregulation and privatization on nationalized industries. Often the conditionalities are attached without due regard for borrower countries’ individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries. IMF conditionalities additionally result in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. Issues of representation are raised as a consequence of the shift in regulation of national economies from state governments to Washington-based financial institutions in which most developing countries hold little voting power. The IMF packages have also been associated with negative social outcomes such as reduced investment in public health and education.
Other observations about the World Bank financed projects include the following: (1) finance of construction of hydro-electric dams which resulted in displacement of indigenous peoples of the area; (2) the World Bank’s undemocratic governance structure which is dominated by industrialized countries is biased in favour of the private sector; (3) the World Bank continues its financial support for heavily polluting industries which includes coal power; (4) the World Bank working in partnership with the private sector undermines the role of the state as the primary provider of essential goods and services, such as healthcare and education, resulting in the shortfall of such services in countries badly in need of them; (5) the World Bank’s private sector lending arm – the International Finance Corporation (IFC) – has also been criticized for its business model, the increasing use of financial intermediaries such as private equity funds and funding of companies associated with tax havens; (6) the World Banks’ views and prescriptions undermine eliminate alternative perspectives on development; and (7) the World Bank and IMF governance structures are dominated by industrialized countries.
Decisions are made and policies implemented by the leading industrialized countries of the G8, excluding Russia, because they represent the largest donors without much consultation with poor and developing countries. It has been reported that the Eskom generators which the World Bank loan is going to finance are going to be built by Hitatchi. Hitatchi was awarded a lucrative tender to build those generators by the ANC government. At the same time the ANC’s investment arm and fund-raising outfit Chancellor House is a shareholder in Hitatchi. It means the ANC has borrowed money from the World Bank to use in the tender it has awarded itself. Where is Cosatu and the so called communists, some of whom are cabinet ministers? The PAC’s rejection of this dubious World Bank loan will set it apart from political parties such as the DA and demonstrate which political party represents the aspirations of the African people and has the interests of the poor at heart.
By Sam Ditshego
(The writer is a member of the Pan Africanist Research Institute which does research for the PAC and holds a post graduate certificate in Development Economics and Policy Making)