Dubious loans trap Africa in Third World debt
June 09, 2005 Edition 1
Terry Crawford-Browne
European politicians flocked to this country after 1994 to pay tribute to our new democracy with one hand, and to peddle weapons with the other. Our government naively succumbed to their pressure.
Germany would win the navy tenders. Britain and Sweden would share the warplane contracts. And Italy would supply helicopters.
The contract tendering process was flawed, and the social and economic needs of South Africans were deemed irrelevant.
Faith-based organisations at the 1996-1998 Defence Review pleaded that poverty was the real and urgent threat to our security and democracy.
But we were overwhelmed by the arms lobby that concocted the economic absurdity that spending R30 billion on armaments would produce R110bn in offsets and create over 65 000 jobs. The most economically illiterate person knows better than to spend R30 and expect back R110 in change.
British Prime Minister Tony Blair led the pack. When he visited Cape Town in January 1999, he touted offsets as a "Marshall Plan" towards economic stimulation and job creation. British Foreign Secretary Jack Straw has confirmed more recently that the British government fully backs and monitors the offset
programme.
By contrast, the arms deal "affordability study" in August 1999 warned cabinet ministers that the arms deal was likely to lead the government into "mounting fiscal, economic and financial difficulties". It showed conclusively that expenditure on the arms deal would crowd out social investment in housing, education and welfare.
It also noted that instead of creating over 65 000 jobs, the negative economic consequences were likely to lead to the loss of between 115 000 and 200 000 jobs.
Judge Hilary Squires, in his Shaik judgment, has referred to the auditor-general's report in September 1999 that the arms deal was a "high risk" proposition. Yet despite all these warnings, the minister of finance in January 2000 signed the foreign loan agreements that give effect to the arms deal.
Barclays Bank is financing the BAe Hawk and BAe/Saab Gripen fighter aircraft against guarantees by the British government's Export Credit Guarantee Department (ECGD). The ECGD underwrites British arms exports, dam construction and power station projects, many of which are notorious for corruption. Almost all of Africa's debt to Britain originates with transactions underwritten by the ECGD.
SA Air Force leaders and the former secretary for Defence objected that the BAe aircraft were both too expensive and unsuited to South Africa's needs. They were overruled by then defence minister Joe Modise. He insisted that buying British would support Denel - the state-owned arms company that hovers on bankruptcy.
The loan agreements have never been referred to or approved by parliament, in contravention of the Public Management Finance Act. The minister of finance's own legal counsel has admitted that their default clauses are "potentially catastrophic" for South Africa.
Wittingly or unwittingly, this has ceded control over South Africa's economic and financial policies to Barclays, the British government and to the International Monetary Fund.
The IMF unfortunately has degenerated into a super debt collection agency for First World banks when their loans to the Mobutus, Abachas and Suhartos of the world come unglued. Loan agreements for projects of very dubious economic value are the instruments through which Africa has been deliberately entrapped in Third World debt. The Barclays takeover bid for Absa must be seen in this context.
Having already signed away South Africa's sovereignty in the arms deal loan agreements, the minister of finance had no option but to approve the takover. The Barclays bid can, however, still be rejected by Absa's institutional shareholders and the courts.
The Barclays proposal has been hyped-up as a massive vote of confidence in South Africa. It is nothing of the sort.
Let us remove our blinkers before we gullibly swallow another arms deal fiasco. Institutional shareholders in Absa - Sanlam in particular - are obligated to the people of this country to place the national interest before the lures of short-term profit.
The issue at stake is huge. It is no less than a brazen attempt by Blair to recolonise Africa through British banks and corporations. His Commission for Africa is central to his scheme to complement the American-led "War on Iraq" so that the United States and Britain can control the resources of the Third World. Nigeria, Equatorial Guinea and Angola are just three examples of oil-rich countries that have been plundered by British banks.
