The recent announcement of yet another World Bank loan signed by National Treasury, to the tune of US$1.5 billion, is just the latest instance where National Treasury’s unilateral action threatens to compromise the sovereignty of the country and the realisation of socioeconomic rights for people in South Africa.
The scramble to obtain ‘cheap’ foreign currency during the height of the Covid-19 pandemic provided the perfect pretext for International Financial Institutions (IFIs), like the World Bank and the IMF, to dive into South Africa’s public finances and policymaking space. Since then, these IFIs have supplied billions, often in dollar or euro-denominated loans, that are conditioned on the dismantling of state control over key economic resources, such as electricity and rail.
Unfortunately, as detailed in the IEJ’s recent policy brief, the country’s legal framework and institutional processes around taking on more IFI debt have facilitated this problem. In particular, the Public Finance Management Act (PFMA) grants the Minister of Finance nearly complete discretion on taking on international loans. The PFMA lacks provisions for full disclosure, extensive consultation, or consideration of how these loans will affect the livelihoods of ordinary citizens. This approach is counter to the principles of our participatory democracy and disempowers the public from seriously challenging the extent of South Africa’s debt burden and the conditionalities that come with it.
Now more than ever, it is imperative that Parliament acts quickly by changing the law to provide for greater supervision on the acquisition of IFI loans in the interest of protecting national sovereignty, socioeconomic rights, and debt sustainability.
The public must not be duped into seeing this loan as simply an alternative, ‘cheaper’ way of financing infrastructure spending. It carries significant risks. First, the World Bank loan, denominated in foreign currency, could lead to far higher repayment costs if the rand declines relative to the dollar. Similarly, since the interest rate is not fixed, and instead depends on the dynamics of the market for US-issued bonds, changes in the monetary policies of major economies could hike repayment costs. Meanwhile, National Treasury continues to impose severe restrictions on government spending. Which means that if these risks materialise, spending growth on education, healthcare, and development will inevitably be sacrificed, all to appease foreign lenders.
Perhaps the most insidious effect of this and similar loans is the erosion of the country’s ability to pursue policies independently. The World Bank’s Development Policy loans traditionally carry policy conditionalities (termed ‘prior actions’) that the country must abide by. Failure to adhere to these, often undisclosed, conditionalities could undermine South Africa’s ability to acquire international finance on reasonable terms, as we have seen in countries such as Kenya and Argentina. Notably, South Africa has struggled to follow through on prior actions, with the World Bank scolding the government for its “past failures to reform” despite receipt of finance.
Furthermore, these conditionalities are geared towards the further commodification of basic services. The policy document linked to the loan emphasises the need to incentivise municipalities to collect revenue from the largely impoverished population. This is complemented by the call for private sector participation in the provision of electricity, port, and rail services. The Minister of Transport is already moving to entrench some of these proposals through law. Future democratic governments may fear reversing these policies if doing so violates IFI lending conditions. These loans lock us into policies that promote private accumulation of profit over people.
Until the uptake of sovereign loans follows a wide, consultative process, as is done in more than 50 countries around the world, and as has been recently proposed by the EFF, as well as recommended by Parliament’s Standing Committee on Finance in 2023, IFIs will continue to pull the strings on economic policy, to the detriment of a pro-poor, nationally-owned development paradigm.
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For media inquiries, please contact: Dalli Weyers | dalli.weyers@iej.org.za | 082 460 2093
Amaarah is a Junior Programme Officer in the Rethinking Economics for Africa project. She is currently studying towards her Masters in Applied Development Economics at Wits University. 
Dr James Musonda is the Senior Researcher on the Just Energy Transition at the IEJ. He is also the Principal Investigator for the Just Energy Transition: Localisation, Decent Work, SMMEs, and Sustainable Livelihoods project, covering South Africa, Ghana, and Kenya.
Dr Basani Baloyi is a Co-Programme Director at the IEJ. She is a feminist, development economist and activist. She gained her research experience while working on industrial policy issues in academia, at the Centre For Competition, Regulation and Economic Development (CCRED) and Corporate Strategy and Industrial Development (CSID) Unit.
Dr Andrew Bennie is Senior Researcher in Climate Policy and Food Systems at the IEJ. He has extensive background in academic and civil society research, organising, and activism. Andrew has an MA in Development and Environmental Sociology, and a PhD in Sociology on food politics, the agrarian question, and collective action in South Africa, both from the University of the Witwatersrand.
Juhi holds a Bachelor of Arts degree in International Relations and Sociology from Wits University and an Honours degree in Development Studies from the University of Cape Town. Her current research focus is on social care regimes in the South African context, with a particular focus on state responses to Early Childhood Development and Long-Term Care for older persons during the COVID-19 pandemic. Her other research areas include feminist economics, worlds of work and the care economy.
Bandile Ngidi is the Programme Officer for Rethinking Economics for Africa. Bandile has previously worked at the National Minimum Wage Research Initiative and Oxfam South Africa. He holds a Masters in Development Theory and Policy from Wits University. He joined the IEJ in August 2018. Bandile is currently working on incubating the Rethinking Economics for Africa movement (working with students, academics and broader civil society). 
Liso Mdutyana has a BCom in Philosophy and Economics, an Honours in Applied Development Economics, and a Masters in Applied Development Economics from Wits University. His areas of interest include political economy, labour markets, technology and work, and industrial policy. Through his work Liso aims to show the possibility and necessity of economic development that prioritises human wellbeing for everyone.
Joan Stott holds a Bachelor of Business Science in Economics and a Master’s in Economics from Rhodes University. She brings to the IEJ a wealth of experience in public finance management, policy development, institutional capacity-building, and advancing socioeconomic and fiscal justice.
Siyanda Baduza is a Junior Basic Income Researcher at IEJ. He holds a BSc in Economics and Mathematics, an Honours degree in Applied Development Economics, and is currently completing a Master’s degree in Applied Development Economics at the University of the Witwatersrand. Siyanda’s research focuses on the impacts of social grants on wellbeing, with a particular focus on the gendered dynamics of this impact. His interests include applied micro-economics, policy impact evaluation, labour markets, gender economics, and political economy. He is passionate about translating economic research into impactful policy.
Shikwane is a Junior Programme Officer at IEJ focusing on civil society support and global governance in the G20. He has a background in legal compliance, IT contracting and student activism. He holds degrees in Political Studies and International Relations, as well as an LLB, from the University of the Witwatersrand.
Dr Tsega is a Senior Researcher focusing on Women’s Economic Empowerment within the G20. She examines gender equity in economic policy, with expertise in food systems and small enterprise development. She holds a PhD in development studies from the University of the Western Cape, an MA in Development Economics, and degrees in Development Studies and Economics from UNISA and Addis Ababa University.
Nerissa is a G20 Junior Researcher at IEJ, focusing on advancing civil society priorities within the G20 framework. She bridges data, research, and policy to advance inclusive economic frameworks. She is completing a Master’s in Data Science (e-Science) at the University of the Witwatersrand, and holds Honours and Bachelor’s Degrees in International Relations with distinction. She has worked as a Research Fellow at SAIIA and a Visiting Research Fellow at Ipea in Brazil.
Dr Mzwanele is a Senior Researcher supporting South Africa’s G20 Sherpa with policy research. He holds a PhD in Economics from the University of Birmingham and an MSc from the University of the Witwatersrand. His work covers open macroeconomics, trade, finance, and higher education policy, and he has published widely on inequality, unemployment, household debt and higher education curriculum reform.
Kamal is the Project Lead for IEJ’s G20 work, focusing on sovereign debt and development finance. He holds a BComm (Hons) in Applied Development Economics from the University of the Witwatersrand and an Erasmus Mundus Joint Masters in Economic Policies for the Global Transition. He has worked with SCIS, UNCTAD and co-founded Rethinking Economics for Africa.