South Africa’s presidency on Wednesday defended the country’s move to invest two billion U.S. dollars in the International Monetary Fund’s (IMF’s) firewall fund, saying the investment would help prevent more South Africans from losing jobs.
At the just concluded G20 summit held in Los Cabos, Mexico, countries including South Africa committed a total of at least 430 billion dollars to the firewall fund designed to ward off another global economic crisis.
“If the global economy falls sharply, there is a serious risk that we will lose more jobs. In the last global recession we lost one million jobs. Our contribution to the IMF is intended to help stave off this kind of crisis happening again,” President Jacob Zuma’s spokesperson Mac Maharaj said in a statement.
He was responding to criticism from the Congress of SA Trade Unions (COSATU) which said South Africa should be a beneficiary rather than a contributor.
“The decision must be reversed and the two billion dollars used to alleviate the plight of the poorest South Africans and to invest in the restructuring of our economy,” COSATU spokesperson Patrick Craven said.
Maharaj said the wealth of a country is not necessarily an indicator for how much should be set aside for the IMF.
“Like China and India, South Africa is a responsible global citizen. We are in the G20 to support global stabilization and growth. We need to continue to do our duty,” Maharaj said.
With a lower per capita income than South Africa, China has set aside 43 billion dollars for the fund. India, which is “considerably poorer” is allocating 10 billion dollars, he said.
SA’s commitment, he said, should not be considered as a gift but a sound financial investment.
“If the IMF uses the funds, the money is lent to the IMF and not a gift… (and) for all of this time the money will be earning interest for South Africa,” said Maharaj.
“The capital of the loan will ultimately be repaid to South Africa. It’s like lending money to a very strong bank. This is not a risky loan.”
Maharaj said the funds were part of foreign reserves, did not require an additional budgetary allocation and were critical in keeping the rand stable.
South Africa has set conditions for the investment. The presidency said on Tuesday that the funds will be drawn down only if they are needed and only after other resources have been depleted.
“The funds will be invested and earn interest, and would only be drawn down in emergency circumstances. If the funds are drawn down, they will ultimately be repaid and they will continue to earn interest over this period,” the presidency said, according to Xinhua.
The Business Unity South Africa (BUSA) lauded the investment as “positive and necessary.” “BUSA sees the decision for South Africa to contribute two billion dollars to the IMF’s firewall fund as a positive and necessary one in present global economic circumstances,” BUSA deputy Chief Executive Officer Raymond Parsons said in a statement.
