By Prof Bonke Dumisa
The official Department of Health’s Covid-19 statistical releases for the past few days show that our daily new Covid-19 infection cases and daily deaths are now at their lowest ever:
* June 16: 1 936 new infection cases and only 8 deaths.
* June 17: 971 new infection cases and only 5 deaths.
* June 18: 960 new infection cases and only 9 deaths.
* June 19: 995 new infection cases and only 6 deaths.
* June 20: 291 new infection cases and only 16 deaths. The impressive improvement on our Covid-19 pandemic statistics, compared to the past two years, 2020 and last year, and the timing of the valuable World Bank loan of €454.4million, which translates to R7.64 billion, has unfortunately led to more questions instead of the appreciation for the loan by my South African stakeholders.
It is against this background that I pragmatically opine on the latest World Bank loan to South Africa, as announced on June 13. The World Bank approved this loan for South Africa’s Covid-19 Emergency Response Project, following a request by the government of South Africa in financing vaccine procurement contracts.
Having seen many cases of Covid-19 pandemic-related corruption over the past two years, a number of South Africans are asking why is the loan been granted now, when Covid-19 infections are under control, with the state of disaster measures and the national lockdown having already been lifted?
Knowing that we have a cynical or even distrusting South African public, the National Treasury made sure it issued its own detailed statement on this issue where it stated, that: “This project will retroactively finance the procurement of 47 million Covid-19 vaccine doses by the government of South Africa… As of June 13, 2022, over 36.4 million doses have been administered with about 50.3% of adults and 29.2% of 12- to 17-year-old adolescents vaccinated.”
To those that question why it is the World Bank has given us this loan when the Covid-19 figures are now down, the answer is that this money will be used retroactively, meaning that this money will be used to offset the funds which had to be diverted from other important service delivery areas in order to urgently deal with these Covid-19 pandemic expenditures which had not been foreseen in the Medium-Term Expenditure Framework budget allocations for 2020, 2021 and 2022.
The South African Federation of Trade Unions (Saftu) has criticised this World Bank loan, contending that it “will further compromise South Africa’s economic sovereignty”.
The Saftu scepticism is mainly based on archaic concerns about both the World Bank and the International Monetary Fund that they always impose terms and conditions that tend to dictate how national states must run their economies, which at times undermined the sovereignty of those national states to an extent that such conditions sometimes led to the general populace of those countries violently revolting against those regimes.
Minister of Finance Enoch Godongwana has reassured South Africans that the terms and conditions of these World Bank loans, with their relatively low interest rates, are “palatable compared to what is available in the market”.
The worry about the many loans that South Africa is raising internationally is that they increase our already high debt-to-GDP ratio, which is already above 70%. South Africa is already spending hundreds of billions of rands per year in loan repayments, which in turn diverts money from other essential service delivery areas.
South Africa is unfortunately in a Catch-22 situation, where it is doomed if it does and doomed if it doesn’t, which is the situation almost all the developing countries and even developed countries find themselves in.
The challenge for the South African government is that it needs to strike a very delicate balance where it has enough financial resources to finance the necessary socio-economic expenditures, while at the same time being able to ensure that we don’t further worsen our debt-to-GDP ratio to the levels that led to all the major international credit rating agencies downgrading the South African sovereign to sub-investment grade, commonly known as Junk Status.
I fully agree that it was necessary and important for the South African government to raise that $480m loan. It will however be very critical for the government to ensure that money is not misdirected to corruption.
* Dumisa is an independent economic analyst.