As a country that relies on European countries for export revenue, it makes sense for South Africa to contribute financial resources to the G20.
There’s been much unhappiness – especially from the country’s unions – about Finance Minister Pravin Gordhan’s announcement of a $2 billion loan (approximately R16,4 billion) to the International Monetary Fund (IMF).
Cosatu condemned the donation to the IMF’s emergency fund, saying that SA was one of the most “distressed” economies in the world and should be a beneficiary, rather than a contributor.
But investment economist Arthur Kamp said these sorts of criticisms are short-sighted.
The European Union is a top trading partner with SA – at least 20% of our exports find their way to Europe – so it made sense for the country to bolster the emergency fund, meant to prevent future financial crises.
“The financial disintegration of the EU would have far-reaching consequences for the entire global economy, including SA,” Kamp, an economist with Sanlam Investment Management, said. What’s more, he added that SA will ultimately earn interest on the money loaned. “Where countries have insufficient savings, they’ve got to get money from the rest of the world. And in an environment where the EU is in a severe downturn, we will find that capital will be withdrawn from developing economies and our gross will be reigned in. All round, we should view the loan in that light.”
Kamp also welcomed the Mexican G20's summit’s decision to focus more on infrastructure investments in developing countries, saying deficit economies like SA’s needed foreign capital desperately.
“As we see more urbanisation and GDP per capita levels rising in developing countries, big infrastructure priorities which facilitate private spending will be a big ongoing theme for the next few years,” Kamp said.
President Jacob Zuma said in a statement that SA, as the only African member of the G20, had made some progress at the summit but that there was still “a long way to go” to advance the continent’s ambitions.
“More work is needed still to reform international financial institutions such as the International Monetary Fund and the World Bank so that they can become more responsive to the needs of the developing world.
“More work must be done as well to mainstream the development agenda within the G20,” he said.