July 05, 2020

Parliament ambivalent in response to World Bank

The recently released World Bank Group Diagnostic Report on South Africa, “An Incomplete Transition: Overcoming the Legacy of Exclusion in South Africa,” has in many ways shifted the ground on which the ruling party has for decades contested the so-called Washington Consensus. The big surprise was that the Diagnostic Report, released in May, was written in language that sounded very much like the National Development Plan (NDP).

Yet diehards in Parliament remained unconvinced. Even the overture by the World Bank Group with its request to address Parliament, and it’s embracing of the concept of economic exclusion as a root cause of enduring poverty, rankled some of the members of the Standing Committee on Finance.

At its August Committee meeting, the EFF’s Floyd Shivambu put it bluntly. “When I saw on the parliamentary programme that the World Bank is coming to brief us, I had to ask: ‘about what’?”

He described World Bank intervention in the emerging economies of Sub-Saharan Africa which have implemented its Structural Development Programmes as “a disaster” and suggested that the international agency would do better to focus its attention on understanding how its policies have contributed to worsening poverty and inequality in the developing world.

'The World Bank should reveal its own role in the history of poverty.'

“Literally every World Bank-packaged policy or solution has been a disaster … and all its promises that its interventions are going to lead to economic growth [have] resulted in the direct opposite,” he said, listing the outcomes as low growth, underdevelopment, exclusion of the poorest and the deepening of inequality.

He said the World Back Group conceded this in its report, in which it states that 80% of its projects to achieve its mandate of reducing poverty and inequality had failed to do so. “The World Bank should reveal its own role in the history of poverty,” said Shivambu, in a thinly disguised reference to the Group’s acknowledgement of its need to brush up on its understanding of South Africa history as a vital aspect of its own analysis.

The Group stated that the study focuses on South African history more than any other of its member country studies had done. “We try to understand how a legacy of exclusion did persist in land, capital, labour and product markets. We believe this legacy of exclusion is a key determinant in inequality and poverty today,” Marek Hanusch, Senior Economist at the World Bank, reported to the parliamentary Committee.

“That is why we talk about an incomplete transition. Because so many South Africans have been excluded in this economy, we say South Africa has undergone a very successful political transition but an incomplete economic transition.”

It was Committee Chairperson Yunus Carrim who best expressed South Africa’s ongoing reservations about the World Bank, and all that it represents to political activists of his generation. He was more conciliatory than Shivambu, repeating at least twice that having the World Bank over to talk to Parliament was “the right thing” to do. He even proposed a possible annual engagement with the international body, although he sounded a little ambivalent at the thought and reminded the Committee that in the first ten years of democracy South Africa resisted any idea of cooperation with the World Bank.

In his summing up, the Chairperson made it clear that agreeing to engage with the World Bank does not mean that the Committee sides with it. He reminded the Committee that the majority party remained very divided on how and whether to engage with the World Bank. Many would agree with the reservations raised by Shivambu, he said, bringing up the long-held conviction that the World Bank was responsible for introducing GEAR, and the dismal failure of structural adjustment.

“We have a deep concern about your role in the country and I hope you convey that to your director,” he said after the World Bank had concluded its report. But further engagement with the World Bank has to be done, he said. And now is the time.

So what has changed? Why did a clearly reluctant Finance Standing Committee agree to play host to a party that it holds responsible for much of the persistent poverty and inequality that South Africa endures today. This in the face of World Bank Group protestations that its mandate lies in dismantling these very aberrations that it stands accused of being responsible for.

Has the ruling party changed, or is the World Bank really talking a new language? Certainly this was a report that forced a questioning of the knee-jerk rejection of anything to do with the world body and its partners, such as the IMF?

Carrim spelled it out: “Unusually this report focuses a lot on inequality in a way that is more consistent with some of the debates of the majority party,” he said. He reflected the ambivalence that the ruling party continued to hold, almost sounding as if he was struggling to convince himself that this new-look World Bank deserved a hearing.

We must engage with you, he concluded. “You are looking at inequality. You have a lot of technical resources and other resources we as a committee don’t have so I think it’s the correct thing to do”, but he returned to “the disjuncture between your observations about what is going on in this country, most of which we agree with, and your solutions”.

A lot of that was about the Bank’s not unexpected argument that the private sector had an extended role to play in bringing about development. Carrim countered with a blunt reply: “I don’t why you want the private sector to have a bigger role in shaping policy. The private sector plays a major role in shaping policy but it never comes to the party.

“What we want – in the view of the majority in government ‑ is private sector partnerships, private sector investment, but so far it has had a huge say but delivered very little We have a New Development Bank and we have BRICS and we really want to find an alternative to the Washington Consensus.”

There it was, out on the table. Carrim had summed up the ruling party’s ongoing reticence about cosying up to the World Bank.

“Unless the World Bank takes some responsibility for the failures in the developing world your credibility here will always be questioned,” said Carrim.

What political figures like Carrim want is to see are parliaments in emerging countries being in a position to hold the World Bank to account, but that is still some way off. “We hope, in the new [parliamentary] term to hold you more to account, but at least you are here, listening to us, and if you don’t fully agree with us, at least our engagements will become far more robust.”

Carrim concluded that the Bank’s proposals “are pretty tame. There is nothing original in what you are saying,” he said and agreed there was an overlap in the report with what the ANC government was proposing.

The report repeats that South Africa’s inequality of consumption and assets is the highest in the world, and that based on a definition of the poor as those earning less than about R1300 a year about 50% of the population is poor, and they are predominantly black, female, children and rural.

It explains how the main driver of inequality is the demand for skills, which is needed for economic growth. As long as such skills are in short supply, the wages of skilled labour are pushed higher, increasing the gap between the skilled few and the majority of unskilled and unemployable.

There are warnings about contestation over resources, and how this results in social vulnerability and places the social contract at risk. Symptoms of the weak social contract include low investment, low growth, unemployment, a volatile exchange rate, student protests, rating downgrades, crime and state capture.

The report cites all the usual suspects. The need to reach an amicable agreement on the mining charter; improve education; provide nutrition to the very young and vulnerable. It was quite a tame report,” said Carrim, adding that the South African state had come up with not very different solutions.

But what was new in this report was something in its tone. This was a more humble World Bank that acknowledged the immensity of South Africa’s challenges and the recognition that institutions like the World Bank does not have all the answers.

Hanusch declared in his presentation that the World Bank Group was a service organisation. “It is not our mandate to influence government policy. We do not have an agenda,” he said firmly.

While the notion of the World Bank in the role of disinterested service provider may have raised a few eyebrows, Hanusch described it as “very much aligned with the National Development Plan”. He was at pains to make it clear that the World Bank Group would only intervene if asked to do so and “if the country wants our resources from us”. He emphasised that data collected during the two-year research programme which went into producing its computer-generated model was gleaned from the National Planning Commission, StatsSA, and even local civil society sources.

He reminded South Africa that the World Bank Group was member-based and that it wants to engage with South Africa, which is a member, but only if South Africa agrees. “It is not our call,” he said in closing, and added “we want to avoid the mistakes of the past by talking to people … and bring our experience” into the country, while at the same time learning from South Africa itself what the country has to teach the World Bank.

By Moira Levy

The World Bank report and the discussion of the summary presented to Parliament are available from the website of the Parliamentary Monitoring Group.

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  • Author: Moira Levy
Last modified on Monday, 20 August 2018 17:14

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Notes from the House is an independent online publication that tracks and monitors Parliament’s role in fulfilling its constitutional responsibilities to improve the lives of South African citizens. Published by Moira Levy with the support of the Claude Leon Foundation.

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