Will IMF loan end up in wrong pockets?
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Durban - The International Monetary Fund’s (IMF) R70 billion loan to South Africa to help mitigate the social and economic impact of the Covid-19 pandemic has prompted analysts and civil rights groups to warn that transparent systems must be implemented to ensure the money is not stolen and that corrupt politicians who defraud the system go to jail for their crimes.
Finance Minister Tito Mboweni announced yesterday that the IMF had approved South Africa’s request for emergency financial support under the Rapid Financing Instrument (RFI).
The Treasury said the country’s “extraordinary Covid-19 budget” would support the national health services, protect the poor, drive job creation, stimulate the economy through reforms and stabilise spiralling public debt.
The presidency said last night that “the government shares the concerns of all South Africans about the possibility and reality of corruption” in the private and public sectors.
“The president has in the past two years taken very clear and active steps to ensure corruption is prevented, detected and prosecuted, and as part of the process has strengthened institutions like the SIU (Special Investigating Unit) and NPA (National Prosecuting Authority) and improved control in government procurement, and there is clear evidence of our determination to rid the economy of corruption regardless of whether it involves the public sector or the private sector,” said the presidency.
It added that all organisations, including the IMF, the New Development Bank and the African Development Bank, had “applied very strict integrity checks making sure that the funds will reach their intended purpose” to benefit the economy and individuals entitled to benefit from the economic recovery plan.
“We are confident the funds will be used for the intended purpose and if there is the exception of a diversion of those funds, that will be dealt with in the severest terms.”
University of the Witwatersrand economist Lumkile Mondi said the loan would supplement what the country had been unable to borrow domestically.
“We are very concerned that this instrument could end up in ANC comrades’ pockets, because there is no disincentive for malfeasance. If there is any suspicion around you as an official, you only step away for a few moments and then step back, because both the Hawks and SIU have shown that they can’t act against politicians,” he said.
“South Africa has seen billions invested in infrastructure over the past 10 years and it has not yielded stability, and the cost of doing business has only increased. There is nothing we can benefit under the ANC. The electorate has a choice to invest in a corrupt party or to vote the ANC out for a better life for all,” Mondi said.
Organisation Undoing Tax Abuse chief executive, Wayne Duvenage, said the government moved too slowly against corruption. He spoke in light of recent allegations of tenderpreneurship against government officials involving relief funding in the pandemic.
“Government doesn’t seem to have a handle on addressing the extent of corruption and it’s sad to have money stolen from state coffers during a pandemic. This is an interest-bearing loan so we are going to have to pay it back, yet we are not seeing a display of meaningful action to get on top of the corrupt use of these various funds, so it’s a serious concern,” he said.
Duvenage said the government should include civil society in implementing transparent systems such as e-tendering. He said law-enforcement entities had been decimated during Zuma’s era and there was still “a dynamic of political power play and push back” by the Zuma cabal in government.
“A repair job is happening but it’s happening slowly. We believe we will see accountability and we believe we are starting to see it with the VBS matter,” he said.
Corruption Watch head of legal and investigations, Karam Singh, said the organisation had noted the “corruption risks”.
“We need to understand what the funds will go towards and whether, given the heightened risks, the government will put in place appropriate anti-fraud measures including transparency around how funds are spent and who the beneficiaries will be,” Singh said.
“However, heightened corruption risks require a heightened response will the SIU proclamation have scope to investigate the IMF funds? It should,” Singh said.
Right2Know deputy national co-ordinator, Ghalib Galant, said the Zondo Commission had highlighted corruption and how there was a lot of siphoning of any money placed in state coffers.
“Even with the internal money we had for personal protective equipment, there has been tender irregularity and everybody is grabbing a piece of the pie, and that is happening whether we are getting money from multilateral sources or not. We are taking huge chunks of money, which means we going to be indebted for a long time,” he said.
He said the country “may have started to turn a corner with the state capture investigations coming and some of the payback with VBS, but we are by no means out of the woods”.
“The state of disaster and emergency situation has opened up space for opportunists, tenderpreneurs and corrupt parties in both the state and private sectors.
“There are long-term consequences of taking this much money so quickly under a state of disaster, and the fragility of the government system to channel money where it is needed is a systemic issue. It’s not only about corruption, it’s also about the capacity of the system to get the resources to where they are needed,” he said.
Galant said this failure was evident in the distribution of social grants and the Temporary Employee Relief Scheme.
Economist Mike Schussler said the IMF would require stringent oversight of expenditure of the loan, which had been granted at an interest rate of 0,2%.
He said it was the first time in its history that the country had taken an IMF loan and at such a low interest rate it was preferential for taxpayers who would have to repay it.
“This money will go long way to helping us because there is no way we can get money elsewhere at that interest rate and it will help the rand. For the next month or three, we should have a bit of a stronger rand, although it might only be a few cents stronger, but it will help us with the petrol price and with other financial institutions,” he said.
Schussler said the IMF would likely send a team to oversee expenditure and require national Treasury to do the same.
“The IMF always wants a bit more transparency and oversight on what you are going to do with their money, so I think it’s slightly more difficult to take their money,” he said.