ANC president Cyril Ramaphosa. Picture: THULI DLAMINI
ANC president Cyril Ramaphosa. Picture: THULI DLAMINI

The writing is on the wall. It proclaims that there’s an urgency for SA to feel out the International Monetary Fund (IMF) on the best possible terms for a debt bailout. Quite conceivably, discussions in secret are already well progressed.

These would enable SA to decide whether to proceed on its own with the structural reforms that the government knows are necessary – but which have been obscured in promises and prevarications – or to accept the conditionalities for these same investor-friendly adaptations which the IMF is certain to insist on.

Either way, the consequences won’t be pretty. They’ll take SA into another stage of disruption. The best hope is that it will be short-lived and ultimately worthwhile; perhaps with the role of the IMF being comparable to the mid-1980s interventions of the US and European banks that proved a vital catalyst in the demise of apartheid hegemony.

Money, specifically the lack of it, is a cruel taskmaster. It limits choice. The National Party government had to confront it then, and the ANC government will have to confront it now. In whichever manner one plays the fiscal numbers, tweaks to the affordable inventory cannot deflect the politically and financially inevitable.

Such is the ballooning of SA debt that it is stuck in a binary rut. To keep borrowing, for the payment of ever-more interest on ever-mounting interest, is to invite a Humpty Dumpty scenario likely to shatter the fiscus.

That this cannot be an option – with unimaginable consequences for savers, taxpayers and financial institutions holding up the pillars of economic activity – forces consideration of other means for a debt default to be avoided. The race against time is accentuated by frightening levels of unemployment, depressing levels of economic growth and shrinking levels of tax availability.

It’s superfluous repeatedly to analyse the causes of this dangerous convergence, so deep is the consensus among sophisticates. Better to stimulate an awareness preparation among the population at large, for straight-talk understanding of the dilemmas, not least to anticipate a groundswell of recalcitrant opportunists.

Reserve Bank governor Lesetja Kganyago has made a start. Recently he insisted that SA could avoid reaching out to the IMF provided that hard decisions are made. “We know exactly what must be done,” he said. “We know the trade-offs that must be made and we must make those trade-offs.”

Sooner rather than later, somebody among the “we” will need to spell out those trade-offs. Whether in the sights of government or the IMF, nothing can be sacrosanct. No matter how dear to ANC programmes, a rebuild of investor confidence and restoration of policy certainty must envisage wide-scale public sector retrenchments (to chop exorbitant wage bills) and privatisation initiatives (to stem losses and raise capital).

Discomfiting to predict is that such reviews, ideologically anathema to potent factions, will meet with resistance in strike activity and street protests. What Kganyago describes as “bitter medicine” might be more like a course of chemotherapy. But it’s necessary, he warned, that the government takes it “in order to prevent matters from spiralling out of control”.

If they aren’t already out of control, then clearly up for review must be such contentious examples as:

  • Eskom and other failed state-owned enterprises whose borrowings are backed by government guarantees, such as SAA, so that monies aren’t irrecoverably poured into infinity;
  • Affordability of free university admissions and the envisaged National Health Insurance, so that they aren’t prioritised at the expense of such basic imperatives as school education and social grants;
  • Broad-based BEE, so that incentives to redress inequalities aren’t impeded by disincentives to grow businesses and recruit skills;
  • Liberalisation of labour laws, so that hiring and firing of employees are facilitated;
  • Expropriation of property (not necessarily limited to land) without compensation, so that constitutional protections are seen to be inviolate; and
  • Capacitation of the National Prosecuting Authority, so that it has sufficient resources to hunt down the beneficiaries of state capture and seize their assets.

The list continues. Why should the IMF be the backstop? Because, by a process of elimination, if all else fails then it is the lender of last resort. The debate should usefully turn on what the government will realistically do in the context of IMF alternatives, including assessments of upside potential against downside risks.

The success record of the IMF isn’t pristine. Neither is it Santa Claus. Funded by loans mainly from Western governments but also from China, its loans must be repaid with interest. Further, the loans come with conditions.


When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid. These policy adjustments are conditions for IMF loans and serve to ensure that the country will be able to repay the IMF.

This system of conditionality is designed to promote national ownership of strong and effective policies.

Conditionality covers the design of IMF-supported programmes – that is, macroeconomic and structural policies – and the specific tools to monitor progress towards goals outlined by the country in co-operation with the IMF. Conditionality helps countries solve balance-of-payments problems without resorting to measures that are harmful to national or international prosperity.

At the same time, the measures are meant to safeguard IMF resources by ensuring the country’s balance of payments will be strong enough to permit it to repay the loan.

The member country has primary responsibility for selecting, designing and implementing policies to make the IMF-supported programme successful. The programme’s objectives and policies depend on a country’s circumstances.

But the overarching goal is always to restore or maintain balance-of-payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth and, in low-income countries, reducing poverty.

It’s officially explained: “When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid. These policy adjustments are conditions for IMF loans and serve to ensure that the country will repay the IMF. This system of conditionality is designed to promote national ownership of strong and effective policies.”

Since the 1990s the IMF has been implementing the Washington consensus, a policy demanding an increased role for market forces. Principles include lower government borrowing to discourage high fiscal deficits, cuts in government subsidies and reduced corporate taxes. Among other recommendations are support for privatisation of public assets, and the relaxation of rules hampering competition and foreign direct investment.

Nothing too bad about that, is there, if the debt stranglehold is to be broken and the trajectory of jobs destruction reversed? What say Kganyago and President Cyril Ramaphosa, even Ace Magashule and Julius Malema?

The IMF keeps a close watch on SA. Its most recent country report, in July 2018, concluded that “the subdued medium-term outlook falls well short of exploiting SA’s economic potential and could have unwelcome social implications and outward spill-overs”. Thus, sadly, has it proved.

An important buffer against financial market shocks, it also noted, is the “large pension fund assets [which] provide a solid domestic investor base”. Thus, optimistically, may it remain.

But this depends on financial emigration being stanched. In turn, it relies on policymakers eschewing denial and instead displaying the courage that no ANC predecessors have previously had to fathom. The decisions they take will be as tough as those faced by the government of FW de Klerk, similarly confronted by a fiscal wall, 30 years ago.

As then, virtue can be born from necessity.


  • Allan Greenblo is editorial director of Today’s Trustee (, a quarterly magazine mainly for the principal officers and trustees of retirement funds

PODCAST | Taking care of Business: why Sipho Pityana says an IMF bailout is a bad thing

Email us on

For more episodes, click here.

Subscribe: | Spotify | Apple Podcasts | Pocket Cast |