SA has not met all the International Monetary Fund’s (IMF’s) requests for transparency about Covid-19 spending, after the country committed to openness when it became the recipient of a R70bn loan in 2020.
SA took the loan in July 2020 to help it weather the economic contraction caused by the pandemic and to better respond to the virus. In exchange, then finance minister Tito Mboweni signed a letter of intent in which SA made governance and economic reform commitments.
The loan has a five-year repayment term and the IMF noted in its report on Friday that SA remains fully able to repay it, even if facing adverse economic conditions.
IMF economists draw up yearly reports on member countries, known as an Article VI consultation and touched on the Covid-19 loan in the SA report.
The IMF report stated that the National Treasury had published a dashboard with information on Covid-19 procurement contracts, but the database was not yet complete. “Some progress has been made in meeting the governance and transparency commitments” made when requesting the loan “but there are delays”, it said.
The IMF said that government departments had failed to provide the Treasury with all the required information regarding Covid-19 procurement contracts.
Sometimes, a department would provide the name and directors of a firm that was awarded a contract, but fail to include the company’s owner, as required in the loan terms
Concerns about who benefited from contracts such as those to supply masks and sanitiser to hospitals are not unfounded.
The auditor-general’s most recent annual report identified 712 government employees still doing business with the state, despite this practice being banned since 2016.
The IMF noted that of the corruption surrounding Covid-19, procurement had resulted in consequences.
“Corrective actions were put in place and fraudulent transactions were reversed.”
Government officials told the lender that they had faced challenges in capturing, recording, and reporting Covid-19-related expenditure in the public financial management system.
This was in part because of the overlap “between regular and Covid-19-related spending, and the lack of timely access to information on expenditure execution by decentralised entities”.
The biggest scandal about Covid-19 contracts led to former health minister Zweli Mkhize stepping down after contracts awarded by the health department benefited his friends and family.
The IMF complimented SA authorities’ strong policy response to the Covid-19 crisis. The lender, however, noted the pandemic had aggravated SA’s low growth, elevated unemployment, high public debt and weak social conditions.
“The crisis has disproportionally affected the youth, women and black Africans in a society that is deeply unequal,” it said.
The IMF’s executive board said SA should use the budget, due to be unveiled by finance minister Enoch Godongwana on February 23, as an “opportunity to define concrete measures, including containing public-sector compensation, rationalising transfers to state-owned enterprises (SOEs), streamlining tax expenditures, and better targeting education subsidies”.
The lender said it expected SA’s economy to have rebounded by 4.6% in 2021 — after a slide of 6.4% in 2020 that was the worst in a century — but that was unlikely to be maintained. It expects the pace of growth to slow dramatically to 1.9% in 2022, and then just 1.4% in the “medium term”, which is more pessimistic than the Treasury and Reserve Bank predictions. It called for an acceleration of reforms to boost the economy and policy certainty.
The IMF encouraged SA to speed up Covid-19 vaccination efforts.
The Article IV consultation, held virtually in 2022, is held annually between the IMF and member countries to assess their economic performance and policies.
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