Rejecting ‘palatable’ World Bank loan will trigger fiscal crisis, says Finance Minister Godongwana

The official line is the $750-million World Bank loan, or just more than R11-billion, is part of domestic debt management for which National Treasury indicated in 2021 about R547-billion needed to be raised on the markets. It comes with “favourable terms”, including a three-year repayment holiday, which Finance Minister Enoch Godongwana said were “palatable to us compared to what’s in the market”. 

But it was really about the politics.

It was about the ideological push from the EFF, whose chief whip Floyd Shivambu described the World Bank loan as “senseless” and called on the Standing Committee on Finance to reject it. It was about ANC MPs backing the minister, even if they were embarrassed that, although he had been logged into the virtual meeting by his office, he’d not actually been online until 30 minutes after its start. And it was about Godongwana and his team swatting away potentially tricky questions, such as what exactly will this money be used for.

“You may disagree with us. You are entitled to your own opinion, but the rationale [for the World Bank loan] is there,” said Godongwana after being called to deliver closing comments by committee chairperson Joe Maswanganyi about 65 minutes before the meeting was scheduled to end.

“Should the committee reject this, even a notion of the committee to do so, [it] would be detrimental to the work we are doing… If Parliament rejects this [loan], it is going to plunge us into a fiscal crisis.”

Such a comment could be seen as tantamount to bullying the national legislature in its constitutional oversight over the executive. But the minister, formerly the long-standing ANC economic policy honcho, knows how to play his cards, particularly with a friendly chorus line.

ANC MPs Noxolo Abraham and Kenny Morolong had earlier massaged opposition criticism into a request for Treasury to provide further details on why the World Bank loan was taken.

That’s after both Shivambu and DA MP Dion George repeatedly asked for its purpose, describing as unacceptable Treasury’s response that as a World Bank member South Africa qualified for a loan.

“Is it going to be used for social relief of distress (the R350 grant)? Is it going to be used in the 2022/23 year?” asked George, with Shivambu adding: “What is this money going to be used for? Or is it thrown into the fiscus and will disappear?”

“We are going to pick and choose where we are going to use (the money),” said the finance minister, handing over to Treasury.

Treasury’s deputy director-general for asset and liability management, Duncan Pieterse, said that “typically our dollar-dominated funding is used for our dollar-dominated commitments. So we manage the costs prudently.”

And while some dollar-denominated loans in 2021 were converted to rands to meet financing pressures, “we do not intend doing it this year”.

The official joint World Bank-National Treasury statement talks about this policy development loan supporting “the government of South Africa’s efforts to accelerate its Covid-19 response aimed at protecting the poor and vulnerable from the adverse socioeconomic impacts of the pandemic and supporting a resilient and sustainable economic recovery”.

EFF Chief whip Floyd Shivambu described the World Bank loan as “senseless” and called on the Standing Committee on Finance to reject it. (File Photo: EPA-EFE/NIC BOTHMA)