Joburg mayor’s ’embarrassing’ mystery loan ‘too good to be true’

There are still more questions than answers about the “prospect” of a supposed R9.5 billion loan “secured” by Joburg mayor Thapelo Amad to help fund “service delivery issues” and a “smart city”.

Amad announced the prospect in an interview with the SABC, comments which were described by Patriotic Alliance (PA) leader Gayton McKenzie as “embarrassing”.

“What is the mayor saying? What loan? Where and when was this discussed? Which company is giving this loan? We cannot continue defending such stupidity, we must admit that we played a part in this mess, we must fix our mistake soonest,” he tweeted.

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Earlier, ActionSA leader Herman Mashaba also took a swipe at the new mayor as debate and questions continue about Amad’s competence to run the country’s largest metro.

ActionSA’s Gauteng leader, Funzi Ngobeni, said the party feared service delivery in Johannesburg has seen a further deterioration since the election of Amad from Al Jama-ah in January. Ngobeni said ActionSA would submit a no-confidence motion against Amad who, he said, had shown his inability to understand the basics of a loan agreement.

The mayor claimed the loan would attract interest-only payments of 2% for the first five years and, after that, the repayments would stretch over 15 years.

However, official notices for public comment, issued by city manager Floyd Brink last week, spoke only of an unsolicited proposed loan of R1.86 billion from the International Finance Corporation, fully repayable, including interest, in 60 quarterly payments over 15 years.

‘Mere example of received proposals’

The City of Joburg said the remarks Amad made were in reference to various discussions underway; and “numerous unsolicited proposals that have been directed to the city from a variety of stakeholders”.

“The mention of the R9.5 billion loan facility was made as a mere example of the proposals received and not stated as a final deal of the city.

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“It was used within the context of the interview to demonstrate a collective will by the leadership to steer Johannesburg and the inner city towards growth and development.”

‘Story behind loan’

Chief economist at Efficient Dawie Roodt said there was a story behind the loan as Amad had sketched it. Roodt said after the five years, the interest would go up to 20% or even 30% and, typically for a loan of five years, an institution like a big metro would try to secure funding.

“The state that borrows the cheapest money in the country, can borrow for five years for approximately 10% or 12%, so the minister of finance would have to pay that if he wants to borrow money – but for a metro to pay 2% for five years is unrealistically low,” he said.

“There are some institutions which would lend money at very low interests of, for example, 2%. Institutions such as the World Bank will lend money in dollars, which means you are running a forex loss if you have to repay your dollars over five years because you would have to convert your rands to dollars,” Roodt said.

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“And even these intuitions – with recent increases in interests rates globally – would not be prepared to lend dollars at 2%.

“They will probably ask at least for 5% for a worthwhile course,” Roodt said.

Independent economic analyst Bonke Dumisa said an interest rate of 2% was not an issue because the global interest rates remained very low, despite the aggressive interest rates hikes to fight the global inflation pressures.

“But only starting to pay the loan back in five years sounds too good to be true. The World Bank and the International Monetary Fund did not normally give some shorter payment holidays,” he said.

– Lunga Simelane and Faizel Patel

– news@citizen.co.za