The decision solicited an angry response from labour unions with Cosatu calling for the decision’s reversal. But the DA and an independent analyst lent qualified approval to the decision, but expressed some concern about what SA would get in return for its generosity.
Cosatu strongly condemned the “donation” on Tuesday, calling for it to be reversed and for the money to be invested in SA infrastructure.
“The reality is, however, that South Africa is one of the most ‘distressed’ economies in the world, with massive levels of unemployment, poverty and inequality, far above the levels in any other G20 nation, and should therefore be a beneficiary rather than a contributor to such a fund.”
“How does this decision square with the repeated Treasury (warnings) that the government has absolutely no money to meet the public-sector wage claim or to pay off Sanral’s debts?”
“How will communities with no sanitation, running water, electricity or tarred roads be expected to understand that an amount of money that could have built more than 30 000 RDP houses should be donated to a fund set up to protect big business?”
Cosatu said it agreed with its affiliate, the South African Municipal Workers Union (Samwu), that the IMF and World Bank were not neutral institutions and had impoverished vast numbers of people, including through a policy of privatisation.
Danny Bradlow, professor in law at the University of Pretoria and co-ordinator of the Global Economic Governance Programme at the SA Institute of International Affairs, also lent qualified approval to the government’s decision.
In Los Cabos, Mexico, leaders are set to confirm they will double the IMF's firepower. The fund’s managing director, Christine Lagarde, said pledges now totalled $456bn, up from the $430bn in April, even though some emerging nations were frustrated with the slow pace of winning more power at the global lender.
Explaining the decision to invest the $2bn, the SA government said: “The crisis in Europe persists and is affecting the rest of the globe. Global growth has slowed, and unemployment is rising.
The government stressed that the firewall would be available for all countries and regions and that the $2bn “would be considered part of South Africa’s foreign reserves”.
The $2bn is in addition to the $532.4 million SA contributed to the IMF’s $579bn NAB (New Arrangements to Borrow) backstop fund in November. A chart published by the IMF showed Brazil, Russia and India each pledged $10bn, China pledged $43bn, while SA offered $2bn. The government stressed that if the IMF instructed it to provide foreign currency to another IMF member country under the NAB, the IMF would guarantee repayment of the loan plus interest. And if SA ran into debt problems after lending money under the NAB, “this money will be repaid to South Africa immediately.”
Source: Pretoria News