Why South Africa should say 'NO' to IMF policies
The move to establish a 'Food Corridor' in sub-Saharan Africa is being backed by the Bretton Woods institutions. When Michel Camdessus, the IMF Managing Director, visited South Africa on 16 October 1996, members of popular organizations and activists expressed apprehension at his visit and issued the following as part of their 'Campaign Against Neoliberalism in South Africa'.
AS members of popular organisations and activists of the Democratic Movement, we have come together to launch a 'Campaign Against Neoliberalism in South Africa' and, in particular, to express apprehension at the visit (17-19 October) by the Managing Director of the International Monetary Fund, Michel Camdessus. Neoliberalism is the 'free market' approach to economic and social policy that large banks, corporations and their allies in the IMF, World Bank, World Trade Organisation and Northern governments are insisting all countries adopt.
Camdessus' brief South African tour was recently announced by Finance Minister Trevor Manuel: 'We have invited him to extend the good relations that we have with the IMF... He wants to have discussions with the trade union movement, student organisations as well as the normal constituency such as business people and government leaders.'
The background for the visit includes a history of IMF support for apartheid, including loans of more than US$1 billion to the South African regime during the late 1970s (in the wake of financial panic caused by the Soweto uprising) and early 1980s (when the gold price collapsed and the regime was most urgently in need of external monetary support). From exile, the ANC condemned the IMF for propping up apartheid. The IMF then assisted the regime with its increasingly neoliberal economic policies during the late 1980s, and designed South Africa's Value Added Tax during the early 1990s, leading to mass popular protest.
In 1993 the IMF granted a large loan which included secret 'conditionalities' that ensured that a democratic South Africa would not waver from inherited undemocratic economic policies, as well as informal conditions that the new government retain the National Party Finance Minister and Reserve Bank governor. Against this background of hostility to democratic aspirations and development, we must make the following points about the Camdessus visit:
1. The Finance Ministry's attempt to establish 'good relations' with the IMF follows its promotion of a macroeconomic strategy in June 1996 which bears an uncanny similarity to the IMF's 11 new 'principles for economic success', also termed the '11 Commandments'. The Growth Employment and Redistribution strategy - emphasising cuts in government expenditure (particularly 'consumption' expenditure which will threaten social services), continuing high real interest rates, export-led growth and trade liberalisation, privatisation and permission for increased capital flight from South Africa - mimics the free-market, monetarist policies that across the world favour the interests of powerful conglomerates and banks at the expense of workers, the poor, women, youth and other marginalised social forces.
The warm reception received by the SA delegation to the IMF/World Bank Annual Meeting in Washington earlier this month follows months of close collaboration in designing SA economic and development policy, marking a fundamental departure from policies outlined in the Reconstruction and Development Programme (RDP). The fact that just four months into the new strategy, some of the economic model's most crucial variables - job creation, the exchange rate, interest rates - have dismally failed to meet government targets, is both a reflection of the more general bankruptcy of IMF-style orthodox policies and a reminder that the strategy must be completely renegotiated with government's major popular constituencies.
2. Many had feared a steady drift away from the social justice values and redistributive policies expressed in the RDP and their replacement with neoliberal principles and programmes. Reflecting this, some government officials - particularly in the Finance Department and Reserve Bank - appear to now entirely ignore the RDP warning that the IMF, World Bank and GATT affect our neighbours and South Africa in different ways. In the case of our neighbours, they were pressured into implementing programmes with adverse effects on employment and standards of living....
Relationships with international financial institutions such as the World Bank and IMF must be conducted in such a way as to protect the integrity of domestic policy formulation and promote the interests of the South African population and the economy. Above all, we must pursue policies that enhance national self-sufficiency and enable us to reduce dependence on international financial institutions'.
3. In most developing countries, the IMF and World Bank have come to direct economic policies and have thus undermined national sovereignty largely through the leverage they enjoy as creditors. This has not been the only mechanism for exerting leverage in South Africa, and indeed the neoliberal influence over economic and social policy has often occurred in the absence of ongoing lending. Perhaps just as importantly, the IMF and World Bank have the ability to psychologically influence prospective foreign investors, in a context in which foreign investment is incorrectly seen by a small group of government policy-makers and advisers as the overarching factor for economic growth.
Since the 1980s, South Africa has succeeded in attracting merely large amounts of 'hot money' foreign investment into speculative stock and bond markets (leading to subsequent bouts of currency volatility), with virtually none of the direct foreign investment that might challenge existing monopolistic conditions, transfer technology, or create jobs and products for consumption in the local market. We believe, therefore, that the move towards close relations with the IMF, premised upon attracting what the Minister of Water Affairs correctly termed the 'mythical foreign investor', should be viewed with alarm by all those in South Africa committed to sustainable, people-centred development. This is especially so when we consider the role the IMF and the World Bank have played elsewhere.
4. Across the Third World, Structural Adjustment Programmes imposed by the IMF and World Bank to obtain the repayment of foreign debt have led to famine, environmental destruction, and the dismantling of health, education, infrastructural and social welfare programmes. These programmes nearly always include the same set of measures: currency devaluation, decontrol of exchange rates, higher interest rates, financial deregulation, trade liberalisation, privatisation, wage cuts, reduction in the public service through budget cuts and massive retrenchments, labour market deregulation, and the like. The social costs - typically including large increases in the prices of basic goods and food, intensified poverty, deterioration of public services, and rising unemployment - are nearly always borne by those people, especially women and children, who never received any benefits from the borrowings.
Structural Adjustment Programmes have also made small economies vulnerable to transnational corporations that exploit cheap labour (often imprisoned in union-free export processing zones devoid of health and safety regulations with wages that sink to US$1 per day) and that dump toxic wastes and poisons produced in the rich industrialised countries.
5. Debt repayment has become an important mechanism for transferring wealth from the people of the South to financiers of the North. According to the United Nations, developing countries paid US$1,662 trillion in debt servicing between 1980 and 1992. This amount is three times the original amount owed in 1980. Yet in spite of the above transfers the total Third World debt still stands at over US$1.3 trillion.
It is not commonly known that the Third World has repaid almost a trillion dollars of principal over and above US$771 billion in interest. In sub-Saharan Africa the ratios of foreign debt to Gross National Product rose from 51% in 1982 to 100% in 1992, and of foreign debt to total exports from 192% in 1982 to 290% in 1992, a period during which the Third World debt crisis was allegedly resolved.
The external debt of the Third World has become an eternal debt and stands as the largest immediate obstacle to growth and sustainable development. It is therefore crucial that progressive forces in South Africa add their voice to the calls made internationally to cancel Third World debt as the first step towards building equitable and just relationships between and within different parts of the world. The meagre gold sales belatedly proposed by Camdessus to help finance extremely limited debt relief - and only for those countries which religiously adopt the IMF's 11 Commandments - are far too little, far too late, and it is a reflection of the exploitative character of Northern political leadership of the IMF that even these gold sales were not approved at the last meetings.
6. With equal dismay, we learn through the press that the World Bank is now on the verge of making its first loan to South Africa since 1967. The Bank has, since 1994, offered advice to several key ministries charged with implementing the Reconstruction and Development Programme, as well as contributing to the Finance Ministry's Growth, Employment and Redistribution plan. The Bank's own Commandments differ little from the IMF's, and it is no surprise that government's underperforming infrastructure, land reform, and housing policies all follow directly from Bank advice.
The Bank has apparently now sold Minister Manuel a US$67 million loan to improve the competitiveness of South African firms, a dubious proposition in view of the Bank's notorious, self-confessed tendency towards over-optimism regarding Third World exports. Consistent with the RDP, the South African government should renew its previous self-reliant policy of avoiding World Bank loans. And given its record to date, the Bank should close its Johannesburg office and cease dispensing its unpopular neoliberal economic and social policy advice.
7. In the light of the near-universal failure of IMF and the World Bank policies in the developing world, we wish to urge extreme caution upon Finance Minister Manuel. Rather than naively providing Camdessus legitimacy to sell IMF policies to critics in trade unions and social movements, Minister Manuel should take up the mantle of leadership by using IMF and World Bank platforms to call for the cancellation of Third World debt, including the inherited US$18 billion apartheid foreign debt. Indeed Manuel should be using these opportunities to call for the democratisation and transformation of the World Bank and IMF into agencies which serve the interests of poor people and workers, rather than continually undermining our constituencies for the benefit of international banks and corporations.
8. If Camdessus is really interested in meeting critics, he should make himself available for a publicly televised debate through which the concerns raised here can be made directly to the IMF Managing Director, as well as to Minister Manuel. Indeed, we are convinced that the only good that can come of Camdessus' visit is a transparent discussion of the enormous costs of IMF policies. Those policies are being adopted under the 'home-grown' rubric in South Africa, and it is therefore crucial for our citizens to understand how many other countries have also surrendered their economic sovereignty to the IMF and World Bank, and the enormous financial and social costs they pay as a result. Finally, it is crucial for all progressive, democratic South Africans to record their determination that the IMF not recolonise our country, our continent and developing countries across the world.
CANSA has been established to help identify, arrest and eradicate the cancer of neoliberalism that increasingly threatens to reverse South Africa's socio-economic transformation. Beginning with dozens of prominent members from progressive groups in civil society, the campaign intends to recruit support from trade unions, non-governmental organisations, students, community-based organisations, women's and youth groups, environmental organisations, churches and other democratic forces. It will encourage and provide resources to supporters for domestic and international efforts to challenge concentrations of economic power and to promote people-centred development.