S/Africa urged to prioritise poverty alleviation over saving embattled national carrier

The International Monetary Fund (IMF), says its emergency funds for South Africa should be used exclusively to reduce poverty in the country.

The IMF said on Wednesday that the emergency funds ought not to be meant for bailing out the debt-ridden South African Airways (SAA).

IMF Managing Director Kristalina Georgieva said this in a letter made public on Wednesday in Cape Town.

The IMF emergency funds should be used “in an inclusive way to protect people’s lives and livelihoods, and in particular those of the most affected and least prepared to weather the crisis,” Georgieva said.

The letter was in response to growing concerns over the South African government’s intention to proceed with a further 10.4 billion Rand (about 630 million dollars) bailout for the SAA.

In October, Geordin Hill-Lewis, Shadow Finance Minister of the opposition Democratic Alliance (DA), wrote to Georgieva to draw the IMF’s attention to the South African government’s decision to proceed with the bailout plan.

This decision to throw the defunct airline another lifeline is at odds with the commitment made by South African Finance Minister Tito Mboweni in his letter of intent (LOI) sent to the IMF to secure a 4.3 billion dollar emergency loan.

The LOI clearly commits the government to use the funding from the IMF to support health and frontline services and solving the balance of payments problems caused by the COVID-19 pandemic.

Others are to protect the vulnerable, support economic reform, drive job creation, and stabilise public debt.

Hill-Lewis said the SAA bailout will likely be funded by cutting COVID-19 stimulus expenditure earmarked for public employment programmes and for rail infrastructure, or by cutting basic services on which South Africans depend.

He said a decision to prioritise the SAA over all other urgent spending priorities is morally indefensible.

The IMF also underscored the South African government’s commitment “to transparently plan, use, monitor and report all (COVID-19) related spending to ensure it reaches the targeted objectives,” Hill-Lewis said.

“We are pleased that the IMF is keeping close tabs on the government’s spending of this emergency loan,” he said.

The state-run SAA went into business rescue in December 2019 due to heavy losses.

The airline has relied on government bailouts for continued operation.

Over the past 13 years, the airline has incurred over 28 billion Rand (about 1.7 billion dollars) in cumulative losses.

The government has allocated about 30 billion rand (1.8 billion dollars) to bail out the airline over the past decade.