The World Bank has just given us an R11.4 billion concessional loan, thanks to our country’s “major breakthroughs” in governance in 2021. These include:
🔹Digitising social grants and health programmes;
🔹Lifting the licensing threshold for embedded electricity generation to 100MW; and
🔹The adoption of the National Climate Change Bill.
It’s a big boost of confidence as we emerge from the dark days of Covid-19.
The pandemic served to strip SA of its aversion to getting funding from these sorts of institutions for our main budget, not just for special projects. We were right to be cautious: structural adjustment programmes of the 1970s and ’80s devastated many developing countries when it came to the strings attached to financing. But, post-Covid, the International Monetary Fund (IMF) and World Bank responded by pledging hundreds of billions of dollars of cheap emergency loans to hard-hit countries, and SA got in line and made good use of it. 🤞🏽
It’s a sign that, despite SA’s many challenges, we’re on the right track.
As Hilary Joffe put it in her Business Day column: “A global commodities boom came to SA’s rescue. The economy is recovering. The fiscal deficit that Finance Minister Enoch Godongwana will announce in his February 23 budget is likely to be better even than November’s medium-term budget indicated.”
We just need to move faster. Rumour has it the 18-month negotiations to secure the loan were complicated by how slowly the government implemented the reforms that the World Bank wanted South Africa to make before giving it the money. On Tuesday, the IMF said that it now expected SA’s economy to grow by 1.9% in 2022, down from its October forecast of 2.2%.
In other economy news, SA hit record interest lows during the pandemic in an effort to help households. If you had a bond for R2 million, you were saving thousands. But expect that to change: the Reserve Bank is expected to hike interest rates over the course of the year, starting today, as part of a longer cycle of getting us back to where we were. 🙁 It’s the responsible thing to do but yeah, start budgeting.
This article appeared as part of The Wrap, 27 January 2022. Sign up to receive our weekly updates.