IMF responds to Steenhuisen’s request for anti-BBBEE loan conditions

Image credit: Twitter/John Steenhuisen

The International Monetary Fund (IMF) says its COVID-19 emergency loans should be used in an inclusive way to cushion the most vulnerable people from the pandemic’s impact.

IMF managing director Kristalina Georgieva made these comments in a letter to Democratic Alliance (DA) leader John Steenhuisen, Business Day reports. The letter is dated Friday, 24 July.

In May, Steenhuisen wrote to the IMF to protest against South Africa’s use of broad-based black economic empowerment (BBBEE) principles in its COVID-19 economic relief measures. He urged it to impose anti-BBBEE conditionality on its COVID-19 loan to South Africa.

Steenhuisen told Georgieva that at least two departments – Small Business Development and Tourism – had indicated the “race of the business owner” would be used to evaluate applications for business funding.

He added, “Given that this is emergency relief funding to assist stricken businesses to keep their doors open and keep their employees in jobs, it is unconscionable for a government to deny any citizens assistance based on their race. I therefore urge you to make any funding obtained from the IMF for this purpose conditional on its non-racial use.”

Inclusiveness, transparency

In her letter, however, Georgieva told Steenhuisen that South Africa had committed to use the funds transparently and to report on such spending.

She added, “In this time of crisis in South Africa and elsewhere, it is more important than ever to ensure that these funds are used in an inclusive way to protect people’s lives and livelihoods and, in particular, those of the most affected and least prepared to weather the crisis.

“All countries receiving IMF emergency financing have committed to transparently report spending, which will enable an assessment of its impact on mitigating the effects of the crisis.

“The government will adhere to such practices in the context of the IMF emergency financing. In fact, the authorities have committed to transparently plan, use, monitor, and report all COVID-19-related spending to ensure it reaches its targeted objectives.”

IMF approves COVID-19 loan to South Africa

On Monday, the IMF’s Executive Board approved a $4.28 billion (approximately R70.3 billion) COVID-19 emergency loan for South Africa.

In a statement, it said the loan is provided under the Rapid Financing Instrument (RFI) “to meet the urgent balance of payment (BOP) needs stemming from the outbreak of the COVID-19 pandemic.”

The IMF added, “It will complement the authorities’ strong policy response to the crisis and their planned post-COVID-19 fiscal consolidation and reforms to promote growth that benefits all South Africans. The authorities have committed to manage the IMF’s emergency financial assistance with full transparency and accountability.”

The National Treasury said the additional funding is a “low-interest loan that contributes to government’s fiscal relief package.”

“It will also pave the way for government to provide the necessary financial relief required to forge a new economy and mitigate further harm to the economy,” it added.

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