IMF MD Kristalina Georgieva. Picture: AFP/KARIM SAHIB
IMF MD Kristalina Georgieva. Picture: AFP/KARIM SAHIB

Considering the amount said and written about it before becoming a reality, the shock would have been if the International Monetary Fund (IMF) rejected SA’s application for an emergency loan to deal with the fallout from Covid-19.

Few people expected anything different to what was eventually delivered, which was a $4.3bn (R70bn) allocation under the rapid financing instrument (RFI). The speculation had more to do with the terms that would be attached and SA’s ability to live up to them. That’s despite the RFI loan coming with much less conditionality than the typical programmes for countries with severe balance of payments problems.

And the issue of a loss of sovereignty that is so dear to some in the ANC and its allies should not come into play. Ultimately, the best way to ensure your sovereignty is to make sure you never put yourself in a situation in which you need assistance from outsiders.

After a decade of state capture and runaway spending, including on unsustainable public-sector wage settlements that were agreed without the approval of the National Treasury, that boat had long sailed for SA. Even before the Covid-19 disaster, the country was in serious trouble.

SA probably wouldn’t have escaped a ratings downgrade that confirmed its junk status regardless of what else might have happened in March, when Moody’s Investors Service eventually pulled the trigger. So this is not really the time to be worrying about sovereignty.

That said, the conditions that come with this particular loan do not, by any stretch of the imagination, make shocking reading. If anything they are identical to suggestions that have been made before by private-sector economists and ratings agencies.

Reserve Bank governor Lesetja Kganyago has spent much of his time in the hot seat since 2014 talking about the need to implement structural reforms. And so has finance minister Tito Mboweni since he returned to the cabinet late in 2018, culminating in the publication, in 2019, of the Treasury document “Economic Transformation, Inclusive Growth, and Competitiveness”.

The “Tito paper”, as some economists have called it, has the backing of President Cyril Ramaphosa and the cabinet. Writing in Business Day this week, Enoch Godongwana, chair of the ANC’s economic transformation committee, argued that the party’s latest policy document “explicitly reinforces and supports many of the reforms” proposed in Mboweni’s paper.

“There is a pressing need to strengthen economic fundamentals and ensure debt sustainability by carrying out fiscal consolidation, improving the governance and operations of state-owned enterprises (SOEs), and implementing other growth-enhancing structural reforms,” the IMF said in a statement that could easily have been crafted by Kganyago, Mboweni or Godongwana.

Fantasies on the left

Taking a cue from ratings agencies, the statement also touches on SA’s remaining strengths, such as a resilient financial services industry and a credible inflation-targeting central bank that’s also renowned for its world-class banking regulation and supervision.

Any lingering thoughts about policies that would compromise this, such as talk of prescribed assets or the formation of new SOEs, should quietly be done away with, though ministers will continue to pay lip service to appease ANC allies on the left, who won’t easily give up fantasies for a new state bank, for example.

It’s often said by many, including us, that SA has had an oversupply of ideas and not enough resolve as far as their implementation goes. The new-found consensus is only a start — but it’s a good place to start if the country is going to get itself out of the fiscal and economic hole it’s in.

In their letter to the IMF, Mboweni and Kganyago said the government is “open to introducing a debt ceiling” in the budgeting process, a move that’s likely to be controversial within the ANC alliance. Markets are already sceptical about the implementation of other budget measures, which are dependent on reining in the wage bill.

It’s by no means going to be an easy process. Many have already given up on Ramaphosa. He needs to prove them wrong, and the time for talking has passed.

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