Author and political scientist RW Johnson has predicted that South Africa will eventually be forced to go to the IMF and ask for a loan. Several other analysts have also supported this idea, but this lender of last resort has been described as a brutal loan shark by countries who were forced to go to an IMF bailout. Asking for a loan comes with strings attached; countries have to apply painful structural adjustment programmes. So, is this what South Africa would be forced to do if it does not get the spiralling debt of Eskom and the other state-owned enterprises under control? Chief Economist of the Efficient Group, Dawie Roodt told Biznews in an interview that South Africa did not need an IMF loan, but it could be an option if a desperate Finance Minister wanted to enforce much-needed structural change in South Africa. – Linda van Tilburg
Roodt said the simple answer to the question of whether South Africa needed an IMF bailout was, “No”. He said the only reason why a country would approach the IMF to borrow money was when it was suffering from a balance of payments problem, when a country does not enough have foreign currency to pay for imports. Another reason why the IMF would be approached for a loan, was for the import of goods from abroad; in the case of a famine a country without sufficient foreign reserves would approach the IMF and ask for a loan to buy food.
Roodt said it had to be kept in mind that the IMF was normally approached to borrow dollars, but the South African economy did not need dollars, it needed Rands which it could simply create if needed. It would not make sense to go outside of the country and borrow dollars. It had to be kept in mind that an IMF loan could not be used to pay government employers salaries.
There was an instance where Roodt thought that South Africa could approach the IMF and that would be for a political reason; using it as a stick or as a motivation to get difficult policy decisions through. He said the Minister of Finance could use an IMF loan as an excuse to restructure the civil service in South Africa. “There are simply too many civil servants that are being paid by the state. “And the Minister of Finance could use the IMF as an excuse to force through structural adjustment. In this case “an IMF loan could come in handy.”
___STEADY_PAYWALL___
Roodt said, “We are in very deep trouble in South Africa.” The state-owned enterprises had been run into the ground financially. They were hopelessly mismanaged by the ANC and the ANC coalition government. He described it as the most destructive government that the South African economy had ever seen.
Finance Minister Tito Mboweni’s turnaround plan was regarded by Roodt as a step in the right direction, but he said Mboweni was not going far enough. Tito Mboweni was however out of step with most of the thinking with the rest of Cabinet and Roodt said he did not think Mboweni would be around for much longer. He said politics was standing in the way of a proper economic plan for South Africa. Roodt said he would be really surprised if the plan could be implemented because established rights and relationships with the South African Communist Party and Cosatu was going to make it impossible for Mboweni to implement his turnaround plan.
With regard to Eskom, Roodt said the power utility had been destroyed by an incompetent and corrupt government and he thought it was probably not possible to save Eskom. He believed that the total outstanding debt of Eskom should be taken over by the Government as it is basically state debt as the state had guaranteed Eskom debts.
Roodt said South Africa was at a stage where it should take really tough decision. It could not go on like this; ”there are too many people trying to live off too few people.” But he said to rectify the situation “a lot of people are probably going to get very angry, before we can get this economy to grow again.” The anger he said would come from the 50,000 people that were currently being paid at Eskom.
He said the first step in fixing Eskom should be to make it very clear to Cosatu and the other trade unions that “tens of thousands of people must lose their jobs if you are serious in fixing this economy.” Roodt said South Africa got a taster last year of what the likely backlash from the unions would be. When Phakamani Hadebe, who Roodt regarded as a very competent man was appointed as interim CEO at Eskom, he told organised labour that he could not afford huge salary increases any more. This resulted in a strike, Eskom facilities were sabotaged and there were a number of blackouts which had a huge effect on the South African economy.
Radebe stood firm refusing to give any increases because the work force was already overpaid and was too large. But Public Enterprises Minister, Pravin Gordhan intervened and forced Hadebe to step down and allowed a 7.5% increase plus bonuses for Eskom workers. Roodt said the government appointed the right people and then simply overruled them. He said the same was probably going to happen again if any of the state-owned enterprises tried to reform.
