August 5, 2011

Civil society criticises South African loan

A “no-strings attached” R2.4 billion (US$350 million) South African loan to Swaziland to prevent a meltdown of the tiny economy has met with dismay and anger from civil society bodies in both countries. Swaziland, ruled by sub-Saharan Africa’s last absolute monarch King Mswati III, turned to South Africa as a last resort after international financial institutions - among them the International Monetary Fund, the African Development Bank and the World Bank - declined to throw an economic lifeline to the country: The government had refused to accept austerity measures, including cuts in the public sector. The loan, a quarter of what Mswati had reportedly been seeking, has been shrouded in controversy as civil society groups - including the ruling African National Congress’s alliance partner and South Africa’s largest union federation, COSATU - were demanding that democratic reform and respect for human rights be a quid pro quo for the three-tranche loan.

COSATU spokesperson Patrick Craven said in a statement the loan “fails to acknowledge that this crisis has arisen because of the looting of the economy by the royal family and a small elite so they can maintain their luxurious lifestyle, while the cost of this crisis has fallen on the shoulders of the workers and the poor.”

Finance Minister Majozi Sithole has refused to divulge to parliament how the loan would be spent. However, it was expected to provide a reprieve for public sector workers, “bloated by nepotism and patronage jobs”, and facing non-payment of salaries, a member of the umbrella Congress of NGOs (CANGO), who declined to be identified, told IRIN. The loan was confirmed by “a visibly angry [South African] Finance Minister Pravin Gordhan”, according to South African daily Business Day, at a hastily arranged press briefing in Pretoria on 3 August 2011, after Mswati prematurely announced the securing of the loan. Analysts told IRIN the terms of the loan were vague but included a 5.5 percent interest rate and repayments of it through the deductions of SACU receipts to Swaziland. In a 2004 bilateral agreement South Africa urged Mswati to promote human rights and institute democratic reforms.

Dimpho Motsamai, a researcher with the Africa Conflict Prevention Programme at Pretoria-based think-tank Institute for Security Studies, said: “An implicit call for the respect of human rights is just a call… At the end of the day the status quo remains unchanged.” “What it [the loan] may do is give the [Swazi] regime some confidence because there is no explicit articulation of the political conditions [attached to the loan] and this makes it more difficult to have a conversation in the coming months as it [democracy and human rights] was not put to the fore,” she said.

Thogozani Simelane, an investment broker with a financial institution in the capital Mbabane, told IRIN the loan had provided some financial stability as it had specified the local currency, the lilangeni, would remain pegged to the South African rand. “If the lilangeni were to be de-coupled [from the rand] it would go into freefall, plunging tens of thousands of people into poverty overnight. Prices would skyrocket, wages and savings would be worthless and a flood of economic refugees would cross the border into South Africa - which was a key reason why South Africa granted the loan, to avoid that exodus,” Simelane said. A worthless national currency would make the procurement of ARVs prohibitively expensive, he said, and imports of emergency food, agricultural inputs and other items all but unaffordable. “For the sake of our ARV supplies we are happy this happened, but the loan fails to correct the underlying causes of the crisis - and that is unaccountable spending by a government that is unanswerable to the people,” Sammy Ndwandwe of the Swaziland National Association of People with HIV/AIDS, emphasised. (IRIN)

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