[PEN-L:6707] Anger at the IMF -Reply

[Patrick Bond <PATRICK@xxxxxxxxxxx>]

Please circulate widely...

                            STATEMENT BY THE
       Campaign Against Neoliberalism in South Africa

                      On the South African visit by
           IMF Managing Director Michel Camdessus

                                16 October 1996

As members of popular organisations and activists of the Democratic
Movement, we have come together to launch a "Campaign Against
Neoliberalism in South Africa" and, in particular, to express apprehension
at the visit (17-19 October) by the Managing Director of the International
Monetary Fund, Michel Camdessus. Neoliberalism is the "free market"
approach to economic and social policy that large banks, corporations
and their allies in the IMF, World Bank, World Trade Organisation and
Northern governments are insisting all countries adopt.

Camdessus' brief South African tour was recently announced by
Finance Minister Trevor Manuel:  "We have invited him to extend the good
relations that we have with the IMF... He wants to have discussions with
the trade union movement, student organisations as well as the normal
constituency such as business people and government leaders."

The background for the visit includes a history of IMF support for
apartheid, including loans of more than US$1 billion to the South African
regime during the late 1970s (in the wake of financial panic caused by
the Soweto uprising) and early 1980s (when the gold price collapsed
and the regime was most urgently in need of external monetary support).
>From exile, the ANC condemned the IMF for propping up apartheid. The
IMF then assisted the regime with its increasingly neoliberal economic
policies during the late 1980s, and designed South Africa's Value Added
Tax during the early 1990s, leading to mass popular protest. In 1993 the
IMF granted a large loan which included secret "conditionalities" that
ensured that a democratic South Africa would not waver from inherited
undemocratic economic policies, as well as informal conditions that the
new government retain the National Party Finance Minister and Reserve
Bank governor.

Against this background of hostility to democratic aspirations and
development, we must make the following points about the Camdessus
visit:

1. The Finance Ministry's attempt to establish "good relations" with the
IMF follows its promotion of a macroeconomic strategy in June 1996
which bears an uncanny similarity to the IMF's 11 new "principles for
economic success," also termed the "11 Commandments." The Growth
Employment and Redistribution strategy -- emphasising cuts in
government expenditure (particularly "consumption" expenditure which
will threaten social services), continuing high real interest rates,
export-led growth and trade liberalisation, privatisation and permission
for increased capital flight from South Africa -- mimics the free-market,
monetarist policies that across the world favour the interests of
powerful conglomerates and banks at the expense of workers, the poor,
women, youth and other marginalised social forces. The warm reception
received by the SA delegation to the IMF/World Bank Annual Meeting in
Washington earlier this month follows months of close collaboration in
designing SA economic and development policy, marking a fundamental
departure from policies outlined in the Reconstruction and Development
Programme. The fact that just four months into the new strategy, some of
the economic model's most crucial variables -- job creation, the exchange
rate, interest rates -- have dismally failed to meet government targets, is
both a reflection of the more general bankruptcy of IMF-style orthodox
policies and a reminder that the strategy must be completely renegotiated
with government's major popular constituencies.

2. Many had feared a steady drift away from the social justice
values and redistributive policies expressed in the RDP and their
replacement with neoliberal principles and programmes. Reflecting this,
some government officials -- particularly in the Finance Department and
Reserve Bank -- appear to now entirely ignore the RDP warning that "the
IMF, World Bank and GATT affect our neighbours and South Africa in
different ways. In the case of our neighbours, they were pressured into
implementing programmes with adverse effects on employment and
standards of living... Relationships with international financial institutions
such as the World Bank and IMF must be conducted in such a way as to
protect the integrity of domestic policy formulation and promote the
interests of the South African population and the economy. Above all,
we must pursue policies that enhance national self-sufficiency and
enable us to reduce dependence on international financial institutions"
(1.4.17, 6.5.16).

3. In most developing countries, the IMF and World Bank have come to
direct economic policies and have thus undermined national sovereignty
largely through the leverage they enjoy as creditors. This has not been
the only mechanism for exerting leverage in South Africa, and indeed the
neoliberal influence over economic and social policy has often occurred
in the absence of ongoing lending. Perhaps just as importantly, the IMF
and World Bank have the ability to psychologically influence
prospective foreign investors, in a context in which foreign
investment is incorrectly seen by a small group of government
policy-makers and advisors as the overarching factor for economic
growth. Since the 1980s, South Africa has succeeded in attracting
merely large amounts of "hot money" foreign investment into speculative
stock and bond markets (leading to subsequent bouts of currency
volatility), with virtually none of the direct foreign investment that might
challenge existing monopolistic conditions, transfer technology, or create
jobs and products for consumption in the local market. We believe,
therefore, that the move towards close relations with the IMF, premised
upon attracting what the Minister of Water Affairs correctly termed the
"mythical foreign investor," should be viewed with alarm by all those in
South Africa committed to sustainable, people-centred development. This
is especially so when we consider the role the IMF and the World Bank
have played elsewhere.

4. Across the Third World, Structural Adjustment Programmes
imposed by the IMF and World Bank to obtain the repayment of foreign
debt have led to famine, environmental destruction, and the dismantling of
health, education, infrastructural and social welfare programmes. These
programmes nearly always include the same set of measures:  currency
devaluation, decontrol of exchange rates, higher interest rates, financial
deregulation, trade liberalisation, privatisation, wage cuts, reduction in
the public service through budget cuts and massive retrenchments,
labour market deregulation, and the like. The social costs -- typically
including large increases in the prices of basic goods and food,
intensified poverty, deterioration of public services, and rising
unemployment -- are nearly always borne by those people, especially
women and children, who never received any benefits from the
borrowings. Structural Adjustment Programmes have also made small
economies vulnerable to transnational corporations that exploit cheap
labour (often imprisoned in union-free export processing zones devoid of
health and safety regulations with wages that sink to US$1 per day) and
that dump toxic wastes and poisons produced in the rich industrialised
countries.

5. Debt repayment has become an important mechanism for
transferring wealth from the people of the South to financiers of the
North. According to the United Nations, developing countries paid
US$1,662 trillion in debt servicing between 1980 and 1992. This amount
is three times the original amount owed in 1980. Yet in spite of the above
transfers the total Third World debt still stands at over US$1,3 trillion. It is
not commonly known that the Third World has repaid almost a trillion
dollars of principle over and above US$771 billion in interest. In
Sub-Saharan Africa the ratios of foreign debt to Gross National Product
rose from 51% in 1982 to 100% in 1992, and of foreign debt to total
exports from 192% in 1982 to 290% in 1992, a period during which the
Third World debt crisis was allegedly resolved. The external debt of the
Third World has become an eternal debt and stands as the largest
immediate obstacle to growth and sustainable development. It is
therefore crucial that progressive forces in South Africa add their voice
to the calls made internationally to cancel Third World debt as the first
step towards building equitable and just relationships between and
within different parts of the world. The meagre gold sales belatedly
proposed by Camdessus to help finance extremely limited debt relief --
and only for those countries which religiously adopt the IMF's 11
Commandments -- are far too little, far too late, and it is a reflection of the
exploitative character of Northern political leadership of the IMF that even
these gold sales were not approved at the last meetings.

6. With equal dismay, we learn through the press that the World Bank is
now on the verge of making its first loan to South Africa since 1967. The
Bank has, since 1994, offered advice to several key ministries charged
with implementing the Reconstruction and Development Programme, as
well as contributing to the Finance Ministry's Growth, Employment and
Redistribution plan. The Bank's own Commandments differ little from the
IMF's, and it is no surprise that government's underperforming
infrastructure, land reform, and housing policies all follow directly from
Bank advice. The Bank has apparently now sold Minister Manuel a
US$67 million loan to improve the competitiveness of South African firms,
a dubious proposition in view of the Bank's notorious, self-confessed
tendency towards overoptimism regarding Third World exports.
Consistent with the RDP, the South African government should renew its
previous self-reliant policy of avoiding World Bank loans. And given its
record to date, the Bank should close its Johannesburg office and cease
dispensing its unpopular neo-liberal economic and social policy advice.

7. In the light of the near-universal failure of IMF and the World Bank
policies in the developing world, we wish to urge extreme caution
upon Finance Minister Manuel. Rather than naively providing Camdessus
legitimacy to sell IMF policies to critics in trade unions and social
movements, Minister Manuel should take up the mantle of leadership by
using IMF and World Bank platforms to call for the cancellation of Third
World debt, including the inherited US$18 billion apartheid foreign debt.
Indeed Manuel should be using these opportunities to call for the
democratisation and transformation of the World Bank and IMF into
agencies which serve the interests of poor people and workers, rather
than continually undermining our constituencies for the benefit of
international banks and corporations.

8. If Camdessus is really interested in meeting critics, he should make
himself available for a publicly televised debate through which the
concerns raised here can be made directly to the IMF Managing Director,
as well as to Minister Manuel. Indeed, we are convinced that the only
good that can come of Camdessus' visit is a transparent discussion of
the enormous costs of IMF policies. Those policies are being adopted
under the "home-grown" rubric in South Africa, and it is therefore crucial
for our citizens to understand how many other countries have also
surrendered their economic sovereignty to the IMF and World Bank, and
the enormous financial and social costs they pay as a result. Finally, it is
crucial for all progressive, democratic South Africans to record their
determination that the IMF not recolonise our country, our continent and
developing countries across the world.

CANSA has been established to help identify, arrest and
eradicate the cancer of neoliberalism that increasingly
threatens to reverse South Africa's socio-economic
transformation. Beginning with dozens of prominent members
from progressive groups in civil society, the campaign intends to
recruit support from trade unions, non-governmental
organisations, students, community-based organisations,
women's and youth groups, environmental organisations,
churches and other democratic forces. It will encourage and
provide resources to supporters for domestic and international
efforts to challenge concentrations of economic power and to
promote people-centred development. For more information,
contact Stiaan van der Merwe at 2711-339-7253 (fax 403-1485) or
Zaida Harneker at 2711-339-1811 or 837-6071 (fax 339-8084). A list
of signatories to the above statement can be provided upon
request.