China loans: Explain the fine print, please

O woe is us, as we end another week of quite dismal economic news, peppered with transparently phoney euphoria. 

The euphoria was injected by the ecstatic government announcements about money apparently pouring in from China. But, even among the most naive, this failed to dampen concerns raised about more unemployment and a further rise in the fuel price.

The fuel price ticked up slightly this time but, coming on top of the recent higher rise and the increase in the fuel levy, taxi fares have gone up, creating even greater difficulty for the working poor, who need to travel daily to earn their crusts. 

And, as Stats SA pointed out, still fewer will have jobs to go to, given the rise in the official unemployment rate.

Most people — and certainly most of the labour movement — are also aware that there is probably nothing much to celebrate in getting even deeper into debt.  And that is what the news about China’s proclaimed investments amounts to.

Eskom is getting a R33.7bn boost from China for its apparently corruption-depleted coffers, along with R2.4bn from Brics;  Transnet, also apparently ravaged by corruption, has R4bn coming to it from the Industrial and Commercial Bank of China.

But these are loans; money that has to be paid back, with interest. 

Then there is the fact that this inflow is denominated in US dollars, a relatively "hard" currency that tends to strengthen against the rand.

Loans and more loans

The new debt will also be added to existing loans owed abroad that total more than half of what the country produces annually.  In other words, more than 50% of South Africa’s gross domestic product (GDP).

It is is a very unhealthy economic situation. But what is really frightening is that nobody has yet disclosed any details regarding these loans: what are the rates of interest, the terms and conditions? 

And since these borrowings are government guaranteed, is there any specific collateral that has been put up?

To date, Treasury and government have been extremely reluctant to disclose details relating, especially, it seems, to Eskom’s finances. This has resulted in the PSA (Public Servants' Association) this week lodging a high court motion to discover all details relating to the R5bn - apparently government guaranteed - bridging loan advanced to the power utility in February by the Public Investment Corporation (PIC).

The motion also demands details on how appointments to the PIC board were made.  Listed as respondents are finance minister Nhlanhla Nene, the PIC, the Government Employees Pension Fund, Eskom and public services minister Ayanda Dlodlo.

The PSA earlier made clear that it wants public disclosure of various PIC investments made in unlisted entities. It will also join what is likely to be a growing clamour from the whole labour movement for details of the latest Chinese loans, especially in the light of the recent experience of Sri Lanka. 

Nothing to see here, folks

In 2010, that island nation borrowed heavily from China to construct a new port at Hambantota in the south east of the country.  When the loans could not be serviced, the government gave a 99-year lease on the port to a Chinese company.

Such information should make it imperative that government provides the necessary information, chapter and verse, about the loans. Yet, on Tuesday, trade and industry minister Rob Davies, who is also a central committee member of the SA Communist Party, admitted that he had no idea of the details.

In a radio interview, he said this information was in the purview of the Public Enterprises Department, while Treasury dealt with some aspects. 

This retreat into a silo mentality is puzzling, since government continues to maintain that all its decisions are collective; that cabinet debates and agrees all policies.

Loans of the magnitude boasted about must surely have exercised the minds of every minister. They are certainly exercising minds in the labour movement and throughout much of society.

"It really is time that they come clean. There has been enough secrecy and corruption," notes SA Federation of Trade Unions general secretary, Zwelinzima Vavi.

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