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In our case, those who argue against accepting a loan from the IMF on the basis that such funding interferes with a country’s sovereignty are often unable to show how a country’s sovereignty has been used to further development goals including caring for the poor and the vulnerable, writes Ralph Mathekga.
Finance Minister Tito Mboweni is having his way, dragging South Africa by the ears straight to the World Bank and the IMF (International Monetary Fund) to ask for a small loan to plug the hole created by the novel coronavirus pandemic.
To raise part of the R500 billion that government aims to spend to address the impacts of Covid-19 on society, Mboweni proposed to reach out to the World Bank and the IMF to ask for R95 billion.
This is not a huge sum of money for South Africa to borrow; it is just a portion of our ever growing national budget.
The main criticism against us heading to the World Bank for an emergency financial relief has come from the alliance partners (Cosatu, ANC, and SACP).
The alliance partners maintain that if we accept a loan from the IMF, we will be handing over our sovereignty because such loans come with conditions, including interference with how you manage your finances and what you spend your money on.
At the centre of the World Bank loan debate in South Africa is the charge that Ramaphosa and Mboweni would nudge South Africa towards the World Bank's financial management regime that would undercut the pursuit of our policy goals.
In a nutshell, Ramaphosa and Mboweni aim to strip South Africa of its sovereignty by subjecting the country to the loan conditions to be imposed by the IMF and the World Bank.
Critics in this situation want one thing and one thing only: a loan without conditions, most preferably an IMF loan without the IMF conditions.
This is all because we are a sovereign nation, as it is beautifully argued by alliance partners.
I fully agree that we should maintain our sovereignty as a nation.
Hence, we should be suspicious of any loan that would impose some unreasonable conditions on us.
As far as I am aware, however, not even my mother will lend me money without conditions.
Quite often, she insists on one condition: that I pay back the loan.
A small interest may be attached to this condition.
The funding that South Africa will attain from the World Bank should be paid back with interest.
The question then is: under what conditions will South Africa be able to pay back the loan and the interest?
This is where Mboweni's "no condition" loan story becomes a bit complicated and somehow impractical.
South Africa is not only a sovereign nation, but a broke one which has indulged in massive financial mismanagement in the public service in the past few years (i.e. nine wasted years).
If we continue this way, we will not be able to service the loan and pay off the principal amount we owe to lenders.
As I see Mboweni’s strategy - once we accept the loan from the World Bank, we impose conditions upon ourselves to repay the loan, that automatic.
Further and more annoying to Mboweni’s detractors in the tripartite alliance, by accepting the loan we recognise that we need to change how we manage our finances generally, including adopting reforms in the public service to ensure we can eventually pay our lenders.
In our case, those who argue against accepting a loan from the IMF on the basis that such funding interferes with a country’s sovereignty are often unable to show how a country’s sovereignty has been used to further development goals including caring for the poor and the vulnerable.
Sovereignty in this regard is often mistaken for the right of the political elites to loot state resources. In this case, Mboweni’s formula is simple and potentially effective.
He is getting us to borrow other people's money so that we can use it better since we will have to pay it back.
He is eventually hoping that we will learn to use our own money much better so that we do not have to borrow unnecessarily.
Irrespective of whether the World Bank loan comes with conditions, the fact that we must pay it back will get us to rethink how we use money, including our own money that we often misuse.
Those are self-imposed conditions.
Once we borrow even a small amount from elsewhere, we no longer have the right to spend even our own money the way we want until we paid up the loan.
Imagine someone borrowing money to buy essentials such as food. The next thing you find them gambling and boozing around before they pay back the money.
That is not going to make any lender happy.
- Dr Ralph Mathekga is a political analyst and author of When Zuma Goes and Ramaphosa's Turn.
