Virus Funding Deepens Divide in South Africa’s Ruling Party
Divide Deepens in South Africa’s Ruling Party Over Virus Funding
(Bloomberg) --
Top officials in South Africa’s ruling party are at loggerheads over a possible approach to the International Monetary Fund and World Bank to shore up the country’s finances as it confronts the coronavirus pandemic.
Finance Minister Tito Mboweni said last month the government may consider asking the Washington-based lenders for support, and was promptly reprimanded by Ace Magashule, the secretary-general of the African National Congress. The party’s labor union and communist allies also weighed in, saying conditions likely to be attached to any funding would compromise the nation’s sovereignty.
Enoch Godongwana, the ANC’s head of economic transformation and a member of its decision-making National Executive Committee, entered the fray Thursday, saying the party hasn’t decided how the National Treasury should bridge a widening budget gap.
“Both the World Bank and the IMF have provided facilities without the normal stringent conditions that they used to,” he said by phone. “In my opinion, this would be the best time to approach both institutions for a loan as they start giving developing economies a break to get through the coronavirus epidemic.”
South Africa entered a 21-day lockdown on March 27 and shut its borders in a bid to curb the spread of the coronavirus -- measures that have choked off economic growth and tax revenue. The central bank expects the economy to contract as much as 4% this year. Mboweni had been scheduled to brief the media on Thursday about interventions by the Treasury to limit the economic impact of coronavirus, but postponed it indefinitely.
The ANC, which has held power since white-minority rule ended in 1994, has struggled to convey a coherent and consistent message about how the country should be run, with senior officials from opposing factions issuing conflicting policy statements.
While President Cyril Ramaphosa, Mboweni and Godongwana have stressed the need to encourage investment and growth, a group that includes Magashule wants the emphasis to be placed on giving the black majority a bigger stake in the economy. Proposals to allow the state to seize land without compensation, nationalize the central bank and direct pension funds where to invest part of their assets are among the main points of contention.
Raising funds for the budget is an operational matter that doesn’t typically fall within the ANC’s ambit, Godongwana said.
“It would be unprecedented if the issue of approaching the IMF and World Bank was discussed within the ANC,” he said. “There is nothing stopping us from doing so. However, we have never had such a discussion in my 20 years of being a member of the National Executive Committee.”
The conditions attached to an IMF loan could give reformists in the ANC an opportunity to push through long-contested economic changes, Dawie Roodt, chief economist at the Efficient Group, said in a webinar.
“If you want to go to the IMF, borrow money from the IMF and use that as a stick to get your other political partners in line in order to force through certain structural adjustments, that is a valid point,” he said. “But we don’t need the dollars and there’s no need to go to the IMF for dollars, certainly not at the moment.”
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