The move by President Cyril Ramaphosa to root out corruption would ultimately improve the state of the local economy, International Monetary Fund (IMF) Managing Director Christine Lagarde has said.
Lagarde said during a media conference on Wednesday at the South African Reserve Bank (SARB) headquarters in Pretoria, presided over by SARB Govenor Lesetja Kganyago, that based on experience from other countries “attacking head on issues of corruption and doing it in a transparent and accountable way is only going to improve the state of the economy”.
However, she warned that there was a lot of work to be done.
“It is certainly the president’s endeavour to get to the bottom of it and support this project of removing this state capture that has taken place over the course of previous years. I’m sure there will be a lot of good coming out of it even though the process itself is painful for some. For the population of South Africa it is much needed.”
Lagarde is in South Africa as part of a tour of African countries and she has already visited Ghana.
Regarding whether the South African government had sought any financial assistance from the IMF, Lagarde said: “I’m not here to discuss any kind of financial support or to negotiate any kind of programme. I have not received any request to that effect. So that is crystal clear … no, not at all.”
On the topic of reforms that have been initiated since Ramaphosa took power, Lagarde said that there was a momentum and “there were multiple areas to address”.
On land expropriation without compensation, she said that Ramaphosa had explained the plan to her including the “symbolic value associated with that project, the constitutional basis that is necessary and has served the country well in the past, present and hopefully future”.
“We have a few ideas as how to make the principle effective, practical and reasonably well accepted despite the difficulty of those they would relinquish some of their title to asset … We appreciate the cost benefit analysis to support this process.”
When asked about the “symbolic value” of land expropriation without compensation, Lagarde explained that she had not said that this was the only aspect of land expropriation without compensation.
On the topic of education “we say and repeat the world over … education is the investment that will help the youth of this world and this country to be able to adjust … to have broader horizon. In that context, free higher education is a very strong tool.”
Turning to the financing of education, Lagarde said that this was where trade offs were important and sound fiscal policies were key.
On the topic of helping bailout of Eskom, Lagarde said that the IMF would not be loaning the embattled power utility any money as the multi-lateral institution only loaned money to member countries.
“No, absolutely not. We only deal with member [countries] – no private company or public company is a member of the IMF.”
Eskom chairperson Jabu Mabuza was reported to have said during an investor road show that the power utility was looking for the government to absorb about R100 billion of debt as part of a rescue plan.
On private sector investment, Lagarde said that the IMF was of the view that there shouldn’t be any crowding out of the private sector and that the private sector should be a driver of the economy.
“Increased investment … will create the jobs of the future.”
“There are no magic recipes. Predictability. Fiscal discipline. Debt sustainability. A policy mix that will give to the investors the environment that will be conducive to their business.”