IFP warns government over World Bank loan of R11.4 billion

21 January 2022

The Inkatha Freedom Party (IFP) notes with serious concern the announcement made this morning, in a joint statement by National Treasury and the World Bank, that the Bank has approved South Africa’s request for a $750 million (about R11.4 billion) loan.

While financial assistance is required to assist in boosting South Africa’s economy - and while it is common for countries to seek financial aid from the World Bank and other global institutions - National Treasury cannot afford to take on a loan.

According to the joint statement issued by our National Treasury and the World Bank, the purpose of this loan is to "support the government of South Africa’s efforts to accelerate its Covid-19 response aimed at protecting the poor and vulnerable from the adverse socio-economic impacts of the pandemic and supporting a resilient and sustainable economic recovery".

It is true that the global Covid-19 pandemic devasted major sectors of our economy. However, the government cannot simply seek loans to cover funding gaps while the R500 billion in funds allocated to Covid-19 relief in 2020 was plundered, as found by the Auditor-General, due to “fraud and resource leakage” because “controls, [and] procurement systems were weak”.

This loan comes at a time in which we (as a country) are merely trying to stay afloat. We run the risk of losing our sovereignty as a nation since we cannot service our current debt, while our national debt-to-GDP percentage stands at around 70%.

Government spends most of its tax revenue on servicing debt.

Government must not think that this loan is another opportunity to loot the state coffers, nor that it will close the debt gap we currently face. We are essentially widening the gap and digging ourselves further into a debt trap.

A loan is not bad if utilised for a good purpose, however, previous loan funds, financial aid and other grants have been stolen by corrupt officials within government. This, while ordinary South Africans anxiously await the tangible outcomes of such funds to improve their lives by lifting them out of poverty.

The IFP hopes that in this instance, government utilises this loan for its intended purpose.

Issued by Inkosi Mzamo Buthelezi, IFP Deputy President and Spokesperson on Finance, 21 January 2022