Austerity budget accelerates both South Africa’s “Arab Spring” and climate crimes

1 November 2022 by Patrick Bond

“South Africa” by United Nations Photo is licensed under CC BY-NC-ND 2.0.

Can activists in South Africa link campaigns against debt and climate, consistent with a broader international push that heralds a “Loss & Damage” showdown with the Western establishment in Sharm El-Sheikh, Egypt at the United Nations climate summit? While a chapter of the movement is getting up and running, the main spur is ex-leftist Finance Minister Enoch Godongwana.

The former metalworker trade union leader’s austere, 2023-25 three-year budget on October 26 is likely to have severe consequences for both the debt squeeze and climate crisis. In spite of allocating more than $110 billion annually, Godongwana’s reduction of vital state goods and services, and his nurturing of historic parastatal agency corruption and privatisation, as well as new climate-insensitive spending such as facilitation of coal exports, are deeds that won’t go unpunished by an increasingly frustrated society.

While July 2021 rioting in KwaZulu-Natal and Gauteng that left 350 dead may have been sparked by former President Jacob Zuma’s arrest, it actually reflected the powder-keg conditions in society. Godongwana’s predecessor Tito Mboweni built that explosion to sky-high levels when in mid-2021 he removed the tokenistic $20/month survival grant which eleven million people depended upon for direct income support.

This was recognised by President Cyril Ramaphosa when he reintroduced that grant a few days after the dust settled. But Godongwana’s subsequent orders were to restrict its distribution, so recipient numbers fell to 7.5 million this year. Also, the buying power of the $20/month originally introduced two years ago has fallen by more than 11% due to inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. and Godongwana has refused to raise the monthly grant accordingly.

If as former President Thabo Mbeki fears, there is an “Arab Spring” coming to South Africa – i.e., recalling the 2011 grassroots democratic uprisings against ossified, Western-oriented oligarchic, despotic regimes (like our own) – then Godongwana can be credited for inviting it sooner than later.

Consider four examples:

  • As the Institute for Economic Justice points out, 2021-22 spending per student will shrink 3.5% by 2025/26, at a time Covid ravaged the teacher workforce and there are 73 000 vacant posts in public education.
  • Home Affairs will suffer a 9.2% cut in real spending this year alone, just when the state is trying to modernise, and as xenophobia pulses among reactionaries.
  • Public healthcare faced austerity in February 2020 when Mboweni cut more than $200 million from the budget just as the world’s worst-ever pandemic was looming down, and Godongwana continues the tradition with a massive cut in real terms next year, of at least 5.5%, with 39 000 vacancies unfilled.
  • Employment programmes are being cut in real terms by 5% even though unemployment is still rising.

In contrast, vast sums are being allocated by Godongwana to dubious sources. The biggest immediate transfers of funds to State Owned Enterprises are $200 million to the Gupta-captured, bankrupt arms manufacturer Denel. Through its ally Armscor, the company’s military output goes to two objectionable recipients: a dozen NATO NATO
North Atlantic Treaty Organization
NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999.
governments which buy SA weapons, and SA National Defense Force troops fighting in northern Mozambique on behalf of Paris-based TotalEnergies, Houston-based ExxonMobil and other imperial and sub-imperial oil companies. In turn, that involvement invited terror threats from Islamic insurgents the day after Godongwana’s speech, aimed at the Sandton financial district.

But the vast bulk of giveaways is still coming: up to $14.5 billion in taxpayer gifts to Eskom’s lenders, as the parastatal’s vast liabilities Liabilities The part of the balance-sheet that comprises the resources available to a company (equity provided by the partners, provisions for risks and charges, debts). are shifted – with Godongwana providing details of the deal only in next February’s 2022-23 budget, no doubt resulting in much further social spending cutbacks.

Worse, Godongwana announced that among conditions he would attach to the Eskom bailout, are that the parastatal privatise more rapidly, and also expand its shaky, often unreliable nuclear energy output, as well as invest more in methane gas generatin. In 2019, when he was the Development Bank of Southern Africa board chair, Godongwana also threatened those South African banks opposed to financing new coal mines, that he would punish them with “prescribed assets,” so as to force them to fund more fossil energy.

Godongwana’s debt relief plan for Eskom stands in contrast to the position taken by civic groups and the second-largest labour network, the SA Federation of Trade Unions (SAFTU), who reject repayment of several hundred billion rands worth of loans for Medupi. This debt is tainted by former Eskom chair Valli Moosa’s award of the main Medupi and Kusile contracts to Hitachi. That deal, successfully prosecuted as bribery under the Foreign Corrupt Practices Act (when Moosa served on the ANC Finance Committee), gave vast profits to Chancellor House, in turn used by the Zuma-era ANC during the 2010s.

It is “Odious Debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
” under international law, and should not be repaid, because the lead lender – the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

at $3.75 billion – knew perfectly well of the blatant corruption, at the time former Finance Minister Pravin Gordhan raised the money from its president Robert Zoellick in April 2010.

Even the conservative daily Business Day newspaper editorialised against the Bank loan. And there were similar Odious Debts incurred before and after to the Western-dominated African Development Bank and U.S., UK, French and German credit ratings agencies.

So it is no surprise that Eskom last week also received the President’s and Cabinet’s approval to borrow $8.5 billion more – from those same governments – at partially-concessional rates for a “decarbonisation” project: the Just Energy Transition Partnership. But because money is “fungible” (i.e. can be shifted within a Treasury from different revenue sources), that supposed climate-friendly deal allows Eskom CEO Andre de Ruyter to not only repay the Odious Debt with the new funds, but to also direct internal monies towards an additional $4.7 billion for gas-fired power plants, including a 3000MW generator at Richards Bay.

And not only is a controversial high-pollution Turkish Karpowership – using methane – expected to soon dock at Richards Bay port for 20 years to produce 1000MW, the World Bank and Transnet also have plans for a gas terminal there. For both, the nearest source for inputs of liquefied natural gas will be Mozambique’s Blood Methane fields, where several thousand Cabo Delgado residents have died and a million people were displaced.

This is not only a potential source of Islamic extremist threats to the financial district of Sandton, if we are to believe the (credibility-scarce) U.S. Embassy, which sounded the alarm – to the irritation of South Africa’s sleepy local intelligence agencies and Ramaphosa – two days in advance of the Pride march on October 29.

Cabo Delgado is also the site where Cyclone Kenneth devastated the coastline with 225 kph winds in 2019, caused by the fast-heating Mozambique Channel, in turn caused by climate change, in turn caused by CO2 and methane emissions. The methane is 85 times more potent than CO2 over the next 20 years, and instead of extracting it, a just world would pay the $8.5 billion as a grant to Mozambicans as a climate-reparations downpayment.

In its critique of the budget, the SAFTU labour movement complained about Godongwana’s deepening fossil dependency, since “Our economy remains totally dominated by the Minerals-Energy-Finance complex. The infrastructure programmes our Ministers speak about are centered on facilitation of this movement of raw materials from the mines to the harbours.”

The massive South African coal export trade is now down 25% from recent levels of 80 million tonnnes/year due to organised syndicates stealing railroad cables. But it is rising fast to both China and especially Germany following Olaf Scholz’s May visit, where the German chancellor requested more South African coal.

But, SAFTU complains, that makes South Africa also responsible for even more “extreme weather events and climate change. The export and burning of coal boomeranged against Transnet in April-May this year, when the KwaZulu-Natal rain bombs destroyed so much rail infrastructure.”

For months, Godongwana appeared unwilling to cover billions of dollars’ worth of resulting “Loss and Damage” affecting public and private infrastructure. Durban’s sewage pipes and pumps are still unrepaired, and hence the popular beachfront areas suffer severe E.coli infestation, leading to their periodic closure and a disaster for the city’s important tourist contribution during Christmas holidays.

And while $322 million was allocated by Godongwana to Transnet to fix its rail lines, half of that will be used “to increase locomotive capacity,” mostly for the Richards Bay route. For SAFTU, “What needs to be asked is whether expanding locomotive capacity to export more coal is actually self-defeating, given the urgent need to address the climate catastrophe… Godongwana’s logic in raising Transnet coal-export capacity at this crucial time is climate-schizophrenic.”

These are some of the most intense contradictions in Godongwana’s approach. But the most banal forces in South African society prefer to ignore them. The Rand strengthened and Johannesburg Stock Exchange rose. Godongwana’s February relaxation of exchange controls allowed $167 billion of institutional investor funds to escape South Africa, and the currency had collapsed since then from R14/$ to R18/$.

Celebration of his speech was most pronounced in Business Day, where lead columnist Hilary Joffe lauded the coming primary budget surplus: “government’s debt-to-GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
ratio starts to flatten and stabilise two years earlier than expected… If the ratios are remarkable, so too is the way the minister is budgeting to use the space they provide
,” including refusal to give civil servants a post-inflation wage increase in spite of 30 months of real wage cuts.

Trade unions and others in progressive civil society are furious. After all, says former Congress of SA Trade Unions leader – turned centre-right politician – Mbhazima Shilowa, “this is a government that has the most trade union leaders since the dawn of democracy in its Cabinet, including the president,” and former metalworker union general secretary Godongwana’s budget “reinforces the view that is taking hold in society, especially among trade union members, that when we are in leadership positions, we are in it for ourselves and that we act no differently than the most despicable employers.”

Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).



8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80