By RW Johnson
Readers of BizNews may be pardoned for having missed the latest issue of the SACP organ, Umsebenzi Online. It carries a swingeing attack – effectively on the Treasury and Finance Minister Godongwana, by the SACP boss, Solly Mapaila (above). Mapaila is angry that the Treasury has just accepted a $1 billion loan from the World Bank to support South Africa’s energy sector. One may imagine Godongwana’s relief at thus receiving a low interest loan for, effectively R19 billion, at a time when he is extremely hard pressed for cash.
Mapaila is angry for several reasons. First, the World Bank is keen to encourage the opening of electric power generation to private interests. One might have thought this was uncontroversial not only because Eskom was manifestly not coping on its own but because private generation of power has been encouraged by the state for some time now and it is gaily going ahead. Not only are solar panels sprouting from roof-tops all over the country but many private businesses are generating power and selling their surpluses on to Eskom.
___STEADY_PAYWALL___Mapaila has two very bad words for this process. One is “privatisation” but much worse – and a word he uses all the time – is “neoliberal”. (This offends against the rule that one should never call anyone by a name they won’t use for themselves. I’ve never yet met anyone who says “I’m a neoliberal”.)
Mapaila also argues that the problem with foreign currency debt is that if the Rand depreciates then South Africa will end up paying out more Rands than it had reckoned on to pay the debt. This is a strange argument, which tends to see Rand depreciation as a natural process. It’s not: it’s caused either by higher inflation or by loss of confidence in the government’s management of the economy. In fact if you borrow in dollars you have to pay back in dollars so Rand depreciation is rather a red herring.
Mapaila also says foreign loans are bad because then foreigners set the interest rate you pay. Actually, the lender always determines the interest rate, whether foreign or local. And happily the World Bank is charging far lower interest rates than the South African market demands.
Mapaila argues that borrowing in dollars gives “decisive control” to foreign exchange markets. This is bad because he doesn’t like the Rand being a free floating currency – he would like its value to be fixed by the state. Experience throughout the Global South is that this leads to over-valued currencies which ultimately collapse.
Another strange argument used by Mapaila is that if the state borrows in dollars it can give the impression that it thinks that the pool of capital in Rand-denominated terms is shallow, not deep. But that is exactly what the government has found: once foreigners decide to sell your bonds and your local banks decide they don’t want to buy any more of them then you indeed find that the pool of Rands available to you is nothing like as deep as you had hoped. That is exactly where the government is now.
Finally – and Mapaila is clearly building up to this – foreign currency loans end up placing one in the clutches of “the imperialist controlled IMF and World Bank” which use the terms of their loans to undermine national independence and force governments along a neoliberal path. In Mapaila’s view this is the real Big Bad Wolf which is hanging around at the bottom of the garden.
In fact several steps are missing from the argument. The IMF only gets to force conditionalities upon a country if that country has borrowed imprudently and defaults on its loans. No one forces a country to do that any more than anyone makes a state overvalue its own currency. These are simply errors of policy and management which you can’t blame other people for.
What this is all about, in other words, is the campaign of guerrilla warfare and harassment waged against th Treasury by the Left. In effect Mapaila accuses the Treasury of bad faith, saying he and the Party voted for the developmental state (ie. no privatisation of anything and no neoliberalism) and the Treasury is ratting on that. This continues the Left’s tradition in which the Treasury is seen as virtually an enemy outpost. This is the price any finance minister has to pay for being the voice of realism.
One of the striking things about Mapaila is that when he mentions Eskom it is purely as a SOE. There’s no mention of its problems, about power cuts, large losses, vast debts, its criminal infestation etc. One realises that the Left lives in its own time-bubble. It doesn’t seem to engage with the fact that the whole of society is in a crisis, with water shortages, mass unemployment, runaway crime etc. True, there are a few large abstractions like poverty and inequality though no admission that both things have got much worse under ANC governance.
In the Left’s time-bubble it’s still about 2004. There’s money for everything so no cuts or economies have to be considered, in fact all such cutbacks are definitionally bad. The idea of the developmental state is still mint-fresh and no one has yet seen that, with the failure of all the network SOEs, it has crashed at the first hurdle. In this bubble the only truth is whatever the ANC’s NEC has decided. Any deviation from that is betrayal. The only contemporary reference is to “the imperialist United States propaganda and actions in the NATO-provoked war in Ukraine” and as one can see, even that is an upside-down Alice in Wonderland view of the world.
This, in other words, is what Godongwana – and any other finance minister who follows him – has to deal with. He’s not having a rational debate but dealing with an alternative reality. It’s the same with the advocates of a Basic Income Grant or those who insist all cuts must be avoided. How exactly do they deal with the money running out in March? In practice, though they won’t admit it, all these folk are arguing for South Africa to default on its debts. Of course, it may come to that but, one realises, if that happens it will only be after a wholesale slaughter of illusions.Â
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