In seeking an IMF loan, South Africa has crossed into territory it long sought to avoid. For many ideologues in government and the ruling party, this is a body that represents so much of what it finds detestable.
That COVID-19 relief comes with relatively few strings attached might have made it more palatable. For the country at large, this will nevertheless represent the accumulation of more debt (reportedly in the region of $4.2 billion), with the attendant fiscal challenges.
South Africans concerned about this should note that the country’s predicament is a result of the overall battering the economy has taken for at least the past decade, where a combination of poor economic management, ideological obsession and consequent anaemic growth have taken their toll.
Creditor funds may be a necessary part of dealing with the economic fallout from the pandemic and the economy-strangling lockdown, but they will be of little long-term value if government is not willing to undertake the reforms it has thus far avoided.
Most obviously, it needs to drop plans for undermining property rights via expropriation without compensation, and to rethink race-based empowerment policy. Both of these are hindrances to investment and to the economic recovery we hope for.
For this reason, it would be only good sense to reform policy as part of the loan deal – something for which we are at present campaigning.
Otherwise, we risk merely delaying hard decisions in future, and providing a breathing space not for economic recovery, but for problems to deepen.
With an economy facing a GDP contraction of 7% or more (perhaps well over 10%), and an unemployment crisis of close to 30% (before the pandemic hit), South Africa cannot afford this.
Hermann Pretorius and Terence Corrigan
Institute of Race Relations
