Where’s the money coming from? Unpacking Ramaphosa’s R500 billion
As the dust settles after the mammoth pledge to inject R500 billion into the economy, many are wondering where it comes from.
With President Cyril Ramaphosa having announced that his government will inject R500 billion into South Africa’s ailing economy to try and mitigate the damage of the global pandemic we are facing, many are asking where the money is coming from.
Ramaphosa announced that he had reached out to the International Monetary Fund (IMF), BRICS New Development Bank (NDB) and the African Development Bank, suggesting that a great deal of the money would come in the form of loans from global organisations.
Lockdown loans will cause debt to skyrocket
The People’s Dialogue and former Johannesburg Mayor Herman Mashaba has said that the deals would inevitably cause South Africa’s debt to “skyrocket”, but welcomed Ramaphosa’s strategy.
“Our already high cost of servicing debt, which was exacerbated by our junk status as a result of African National Congress (ANC) mismanagement, will skyrocket further.
“These costs will be borne on the people of South Africa. Urgent clarity is needed on which agreements have been signed, if any, and how these loans will be structured,” he said.
The banks are unlikely to provide full disclosure of the deals for fear of instigating diplomatic tension between the various countries they service, but during a crisis like this, it is likely that the banks offered favourable interest rates on the loans.
According to Ramaphosa, the money is being invested into areas that were already direly in need of support before the pandemic began, and his optimistic view that the injection could kickstart the ailing economy is grounded on the principle that whatever deal he has brokered will be honoured on both ends.
IMF deal with ‘no strings attached’?
Earlier in April, the IMF said that developing countries around the world needed their support more than ever.
“This is an unprecedented crisis, and our member countries need us now more than ever before,” the IMF’s Africa director, Abebe Aemro Selassie said.
Sources who attended crunch talks between Ramaphosa and sceptical members of the ANC earlier in April told TimesLIVE that he had said that the deal would come with “no strings attached”, saying that the deal would be interest free.
“He said if the IMF gives us a loan, it won’t affect our sovereignty,” said the source.
‘President must clarify loan structure’
Mashaba said that Ramaphosa needed to urgently address where the money was coming from and how the deals would be structured, warning that without these clarifications, the Unemployment Insurance Fund (UIF) and South African Social Securities Agency (SASSA) would be left to squander the loans.
“With R130 billion coming from the reprioritisation of the current budget, the president must clarify where funds are being shifted from. The tabling of a new budget is essential to ensure the required level of monitoring and oversight, prevent corruption, and safeguard service delivery.”
“It was only two weeks ago that a letter was authored by Ace Magashule, [the] Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP) condemning the minister of finance for exploring finance from the World Bank and IMF.
“The president must clarify what concrete steps he will lead to ensure that South Africa can be freed from the policy disasters of the last ten years,” said Mashaba.