Political parties and economists have sounded the alarm over a second R7.6 billion World Bank loan to the government to pay for millions of Covid-19 vaccines - some of which had to be destroyed because of the slow uptake by citizens.
The new loan for the country's “Covid 19 Emergency Response Project" comes five months after the World Bank approved a R11 billion loan to the country.
The National Treasury said the loan was to finance 47 million vaccine doses government previously procured and now has to be pay back.
The World Bank's loan approval comes shortly after the International Monetary Fund (IMF) raised serious concerns over the country's economic outlook and its inability to address structural impediments to growth following a visit earlier this month.
The country’s debt currently stands at R4.3 trillion.
Jittery political parties have questioned the latest loan and warned that they would challenge it in Parliament.
They described it as "unnecessary, unjustified" and warned that the government was running out of money and the funds might be diverted to fund consumption.
DA MP Michelle Clarke claimed government resorted to the loan because it had run out of money “to plug the fiscal gap in the budget but is adding to our debt burden.”
Clarke warned that the government would soon reach a fiscal cliff as it rarely met its revenue projections. "Unless there is a major economic reform, government debt is a major risk to the economy."
Another DA MP, Dion Chang said the government was spending loans on consumption expenditure because there was "so much leakage and corruption" in the system and the loans had plunged the country into a serious situation.
"As a country we are going to borrow into unsustainability. If you borrow from the World Bank that's a sign that you're desperate,“ Chang said.
He also said the public debt had been spiralling upwards to a point where the government was paying about R1 trillion over three years in interest .
"For every R5 in tax collected, R1 is used for debt repayment. But they are borrowing more and more. The tax base is shrinking and less and less money will be available for healthcare, education, social services and other major services. It would not have been necessary to take the R7.6bn loan if the finances were better managed," Chang said.
He questioned the timing of the loan which came shortly after the government promised R1bn to help with the KwaZulu Natal flood relief, the R350 Social Relief of Distress grant (SRD) which were stopped two months ago but resumed this week.
"In the case of the SRD we were left wondering whether it stopped due to incompetence or there was no money. Government is in a serious position. No amount of borrowing will fix what the ANC has broken," Chang said.
Economist Iraj Aberdian said based on the recent Covid-19 prevalence and casualties statistics, the loan did not appear to be justified as the pandemic had almost "disappeared from the radar".
On Friday, 971 new cases were recorded which represented a 7.2% positivity rate and five new deaths over a 24 to 48 hour period.
"We also have had a few million vaccine doses that the government was trying to get rid of due to expiry date. It's confusing that the government is now borrowing to stock-up the reserves or supply. These loans are not freebies," said Aberdian.
Government said as of June more over 36,4 million vaccine doses had been administered to over half of the adult population and almost 30% of young children between the ages of 12 - 17. Three months ago 92 370 doses of Pfizer vaccines had to be discarded after they expired.
Economist Dawie Roodt also questioned the need for the loan.
"I don't think we should take the loan if it's earmarked for Covid-19 only. It's not a good idea", said Roodt.
Treasury said the loan would be used to retroactively finance vaccine doses already procured.
“The bulk of the money will be used to pay for vaccines already delivered and administered through contracts previously entered into. Past procurement agreements also cover some deliveries still to happen,” the department said.
United Democratic Movement leader Bantu Holomisa said the loan would be used to sustain consumption instead of incentivising the economy to create jobs.
"Once that money gets into the National Treasury kitty it will be diverted to other so-called priorities," said Holomisa also suggesting that it could fund other projects that the government had promised.
He said the decision would not be left unchallenged and the party would demand transparency and an explanation.
National Treasury said the repayment was spread over 13 years with a three year grace period and the terms were cheaper relative to market funding.
A former member of the Ministerial Advisory Committee on Covid-19, and head of the South African Medical Research Council, Professor Glenda Gray noted that the country paid a "high price" for Covid that resulted in deaths and the government would need to pay back for the vaccines it procured.
"We are in a good situation at the moment with regards to Covid-19 pandemic. But variants can emerge in winter. We have to be prepared.
"The loan is fine but we have to ensure against corruption," said Gray.