Are Covid loans helping or harming SA?

Another year, yet another hefty loan to “help” South Africa.

On Friday director-general of the National Treasury Dondo Mogajane announced a “low-interest” development policy loan of R11 billion from the World Bank, saying it would “assist in addressing the immediate challenge of financing critical health and social safety net programmes to develop our economic reform agenda to build back better”.

He added: “The World Bank budget support is coming at a critical time for us and will contribute towards addressing the financial gap stemming from additional spending in response to the Covid crisis.”

The loan, not our first over the last few years, has justifiably come in for criticism from financial experts and political parties.

In July 2020 the International Monetary Fund granted South Africa a R70 billion loan to support job creation and protection for businesses impacted by the Covid pandemic.

Less than a year later the New Development Bank – a development finance institution established by Brazil, Russia, India, China and SA as part of the BRICS grouping – gave us a R14.5 billion loan.

Our total debt stands at R4.2 trillion.

But as economist Dawie Roodt points out, only economic growth will remedy SA’s sorry financial state.

Roodt said: “Forget about the interest rate, the currency risk could end up costing far more than the interest charged. I hope the money was not borrowed to be stolen. Previous Covid funds were stolen by ‘ineptocrats’.”

ActionSA leader Herman Mashaba echoed Roodt’s comments, saying: “If President Cyril Ramaphosa thinks getting South Africa out of its financial woes is by borrowing money, this will only dig a bigger hole for our country. South African financial woes can only be addressed by economic growth.”

There’s no doubt we will be paying back these loans for generations to come.