President Jacob Zuma at the G20 Summit in Mexico.
South Africans are sometimes good at talking past one another, as was shown this week after the news that we, and other developing nations, would be stumping up cash to give the International Monetary Fund more firepower to combat the eurozone’s continuing financial turmoil.
Our commitment, $2-billion, and the $73-billion committed by China, India, Brazil and Russia, bring the IMF firewall fund to $456-billion. The world’s leading economy, the United States, did not contribute, saying that the IMF was already sufficiently resourced.
Locally, our commitment was quickly dubbed a gift and critics said it would have gone a long way towards plugging the R20-billion funding hole for building the Gauteng freeways, which the government wants to toll.
But the presidency explained that the $2-billion was a commitment that would attract interest, should the IMF make use of it, and that the funds would come from the country’s foreign exchange reserves and not from the budget. It also stressed that our commitment was modest compared with that of our Brics partners.
A right to be concerned
One would expect this to be the case, given the size of South Africa’s reserves compared with the rest of the bloc, although it has to be said that, on a proportional basis, our commitment is on the large side.
South Africans have a right to be concerned and to debate the issue energetically. In the recent round of elections for the top job at the IMF and its sibling, the World Bank, we saw that the developing world got less than a look-in. The developed world wants the developing world’s money, not its leaders.
However, the new commitments have come with an understanding from the IMF that developing economies will get a larger say in how things are run. We have yet to get details on this.
But the most worrying aspect of the eurozone debt problem, which is now engulfing major industrialised economies such as Spain and Italy, is its size. Potentially, no firewall is big enough. South Africans will want to know that the IMF is putting pressure on Europe to solve its problems, rather than running to the fund for cash to fund its unsustainable levels of debt.