The World Bank is back
In May 1990, the World Bank reappeared in South Africa. Patrick Bond analyses the bank's failure to convince South Africans that it has their best interests at heart.
After two decades of absence, the first formal World Bank visit acame not long after the imprisoned Nelson Mandela had re-confirmed his commitment to the Freedom Charter, including its plans for nationalisation. The unbanning of political parties had sparked demonstrations with hundreds of thousands of participants. The COSATU trade unions maintained impressive power and energy, and the country's social movements were at their most vibrant. The Bank tiptoed into this maelstrom with exceptional skill. For on the one side it faced a strong left rump of the Democratic Movement (as well as other radical forces), well aware of the Bank's reputation as the most powerful oppressive force in the Third World since the days of colonialism. Many within the ANC who had lived in Tanzania, Zambia, Uganda and elsewhere up-continent shared a gut feeling that a democratic South Africa must avoid the World Bank like the plague. Econocrat strategy
On the other side - inviting the Bank and International Monetary Fund (IMF) with
— were powerful bourgeois forces. Business ideologues and civil servant scoundrels of the late apartheid era, including leading strategists of the Development Bank of Southern Africa (DBSA), were ever more anxious to show that Pretoria's control of bantustans was dependent not merely upon securocrat musclepower but also upon homeland "structural adjustment programmes" (as the DBSA called them).
These "econocrats," were drawn from both old-guard government and big business cliques, and harboured firm ambitions not only of surviving the transition process but indeed of actually thriving in whatever environment lay ahead. At the vanguard was the Urban Foundation, Anglo American Corporation's main social think-tank, which tried to position itself as the favoured World Bank junior partner (ahead of its rivals the DBSA and Independent Development Trust). Using increasingly strident but nevertheless quite effective policy advocacy, the UF invariably cited free-market conventional wisdom from Washington DC as the gospel.
But as an unintended consequence, the econocrats' arrogance gave many Bank opponents in South Africa experience in understanding the logic and code words of neo-liberalism, critiquing these based on their emergence in the late-apartheid state's development practice, and also gradually coming to know Bank personnel.
For example, during that first Bank visit in 1990, several key ANC leaders were visited by Geoffrey Lamb, a former SACP intellectual who had spent time in jail during the 1960s before escaping to East Africa and then to Sussex, England. There he had completed his doctorate and acted as supervisor to South Africa's emerging cadre of Marxist sociologists, prior to migrating to Washington where during the 1980s he focused on making neo-liberal African economic policies appear to be "home-grown." (Lamb now runs the Bank's London office.)
At Shell House meetings, Lamb broke the ice effectively, and proceeded to assign specialist teams to analyse conditions and generate policy options in macroeconomics, industry, health, education, housing and land reform. Lamb and his colleagues received ANC endorsements for their research, along with chaperons - drawn even from the SACP — for "urban missions." The Bank funded handsome consultancies to bring aboard some influential left-leaning intellectuals and researchers who had previously devoted nearly all their energies to the Democratic Movement, including the trade union movement.
The Bank also agreed that there would be no loans to the De Klerk government, which it too labelled "illegitimate." Nevertheless, the Bank's agenda was revealed in a 1990 paper, Post-Apartheid Economic Options," which called for a social contract "because co-ordination may be necessary to manage the relationship between national wage and price adjustments and to avoid wage push from selected groups of workers." PW Botha's banker
Even this was more enlightened than the IMF, which less than a decade earlier had granted a crucial US$1.1 billion bail-out loan to the PW Botha regime. That loan - and others dating to the post-Soweto financial crisis of the late 1970s - had raised all manner of social and economic controversies, including criticism of South Africa's unrestrained government budget (especially for defence), the Reserve Bank's inadequate monetary control, and distortions and artificial barriers created by apartheid.
As financial sanctions were gradually applied during the 1980s, the IMF quit lending and sent in advisory teams to help the apartheid government switch policies towards neo-liberalism. In 1991, IMF experts designed the regressive Value Added Tax (VAT), which led to a two-day strike by 3,5 million workers in November that year. In 1992, the IMF took another swipe at South African workers with its pronouncement that "real wage growth must be contained."
South Africa * Global snafus
But the early 1990s were also difficult years for the Bank and IMF, in part because their international reputation plummeted to unprecedented depths. Internal reports finally acknowledged the lack of Bank project loan success, including 37% of projects completed "unsatisfactorily" in 1991.
Scandal also emerged when the Bank's chief economist, Lawrence Summers (now a top Us government official), wrote some infamous lines in a December 1991 memo that was quickly leaked to The Economist magazine: "I think the economic logic of dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that... Under-populated countries in Africa are vastly under-polluted." The Bank again made headlines in 1992 when senior staff suppressed a United Nations report critical of their role in the disastrous Sardar Sarovar dam in India. Shortly thereatter, Summers' predecessor, South African-raised Stanley Fischer (who is now deputy director of the IMF), openly conceded that the Bank/IMF "culture of secrecy" was characterised by "few checks and balances." And in a 1993 speech, Bank Africa chief Kim Jaycox admitted that "The donors and African governments together have, in effect, undermined capacity building in Africa. They are undermining it faster than they are building it, or at least as fast."
It was no surprise then that Bank president Lewis Preston wrote a memo complaining of his institution's "increasingly negative external image," concluding that the Bank should now be "actively reaching out to under-exploited constituencies in developed countries, such as private sector industrialists or major academic centres; taking a more pro-active role in defining the agenda for debate with Bank critics; and using modern communications techniques, such as mass media advertising." With Preston's 1995 death and his replacement by James Wolfensohn — a charmer known as the Bank's "renaissance man" — such efforts gradually began bearing fruit. "Advice" to policy makers
Following their colleagues lead, the Bank's South Africa teams also began suffering self-inflicted wounds. An expert on local economic development advised that "low income housing development in the 'available land' between the central city and townships should be avoided," while the main housing expert advocated lower levels of subsidies than even late-apartheid "toiletsin-the-veld" schemes. Bank land reform
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* South Africa experts came under fire for recommendations (later adopted) described as neo-colonial smallholder strategies identical to those that failed in Kenya. And when an urban mission visited Bloemfontein without their ANC chaperons by mistake, the local civics and ANC branch simply walked out on them.
There were enough of these lapses that South Africans could easily distance themselves from the Washington financiers. Rev. Frank Chikane, in 1992 still with the Council of Churches (and today a top advisor to Thabo Mbeki), warned of the "universal outcry and misery" in Third World countries that applied World Bank structural adjustment medicine. "We cannot believe that the salvation of our country lies in an uncritical and undemocratic subjection of our country to IMF and World Bank policies."
Sensing the danger, particularly when drafts of the Reconstruction and Development Programme harshly attacked the Bank and promised there would be no foreign loans for development that did not raise export capacity (so as to avoid a Third World debt trap), staff economists published Paths to Economic Growth. The document included a scenario for economic growth of 5% per year based on a rise in the budget deficit to more than 10% of GDP from 1995-97 (peaking at 12%), thanks to "the common assumption about kick-starting the economy with public investment programmes." Comparing this with the Bank's participation in the June 1996 Growth, Employment and Redistribution (GEAR) policy document, which firmly condemned rising deficits as growth-killing, it is clear that Bank models erratic tools of political expediency. An answer to everything...
After the April 1994 election, Bank staff found various routes to offer advice on social and economic policy. The conservatism of government's old guard, the weakness of new bureaucrats, and the alliances made with business elites all help to explain why land reform, housing, welfare, private-sector health policy and infrastructure have been in30 International Viewpoint fluenced by Bank thinking. The Bank's role in encouraging neo-liberal, cost-recovery policies in turn helps explain why these social sectors have been beset by delıvery problems and why "market imperfections have not been resolved ... but not the right answer
The macro-economic strategy has failed to reach even the modest short-term predictions of the World Bank-DBSA- Stellenbosch-Reserve Bank model (which promised 126 000 new jobs in 1996, a strengthened currency in the last half of the year, and lower Reserve Bank interest rates). When a downturn begins in earnest, demands will intensify that the strategy be scrapped
In their design of urban infrastructure, Bank economists revealed shoddy intellectual work and uncaring professional ethics, as they neglected to follow — or even acknowledge — RDP directives relating to universal access to water, sewage or electricity.
Nor did they factor in important environmental, public health, educational and gender-time benefits of full services that would have swayed the cost-benefit analyses away from pit latrines and communal water taps, back towards RDP promises. Such failures gave Bank opponents plenty of ammunition to challenge policy and, at least in the case of infrastructure, demand a major rethink. In December 1996, the government's chief infrastructure bureaucrat wrote to the Mail and Guardian to emphatically distance himself from the earlier Bank work. Nevertheless, the Bank's low standards and cost-recovery principles remained intact.) Softly, softly
Notwithstanding a much more suave new director (with a social democratic salespitch) and promises of a forthcoming $750 million infrastructure loan, there was sufficient resistance to the Bank in democratic movement circles that another year passed before the arduous task of putting the new South Africa's first Bank credit together really began. Other explanations for the long delay in lending include the lack of constraints to foreign borrowing periodically issued securities to raise hard currency when required - and satisfaction on the part of international financiers with South Africa's evolving economic policies and the hegemonic mimicking of neo-liberal analysis by local compradors.
But this quiet, relatively unhindered process of drawing local economic bureaucrats more closely into Bank-think finally met resistance when Minister Trevor Manuel very publicly invited IMF managing director Michel Camdessus to South Africa in October 1996 "to meet the critics" (students and trade unions). Within days the Campaign Against Neo-liberalism in South Africa (CANSA) had been formed, receiving the endorsements of 60 key activists from social movements. Public protest against Camdessus
Camdessus was greeted by televised protests at his arrival in Johannesburg and prior to his Cape Town parliamentary session, sharp hostility from several ANC MPs the cancellation of scheduled meetings with labour and community leaders, harsh press statements by the Progressive Primary Health Care Network, Sasco and the SACP, and an upsurge of anti-IMF publicity. CANSA attacked the Camdessus visit and called for the closure of the World Bank office.
Popular distrust is not the only problem facing neo-liberals in South Africa. Intense monetarism and other neo-liberal policies aimed ultimately at implementing a freetrade regime with a deregulated currency -is exceptionally difficult to realise in practice. After all, foreign reserves are at only around R10 billion, a few weeks worth of imports. In the event of full-fledged liberalisation, South Africa's continuing balance of payments problems would be exacerbated by losing R13 billion ($2.9 bn.) presently in blocked accounts of former residents (who want to expatriate their South African funds). Moreover the Reserve Bank estimates that another R50 bn. ($11.1 bn.) might flee if exchange controls are lifted. Under the circumstances, only a massive IMF facility would make it feasible to end capital controls without a perilous collapse of the currency, and given opposition to Camdessus from within the ANC, this was something Manuel dared not admit was even under consideration.
It is difficult at this stage to separate structural from struggle factors preventing full capitulation to not just the IMF/World Bank policy framework (which is quite advanced) but to a lending relationship that spells disaster. But although defeats have been suffered by the policy advocates of mass-based constituencies, the period since 1990 has nevertheless demonstrated that when mobilised, South Africa's progressive forces can effectively hold the world's most powerful institutions at financial arms-
Campaign against Neo-liberalism in South Africa
CANSA was 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.
Contact: Stiaan van der Merwe at 011-339-7253 (fax
403-1485) or Zaida Harneker at 339-1811