World Bank: It’s the Pits for the Poor

Against the Current, No. 87, July/August 2000

Patrick Bond

IN EARLY MAY, a National Reparations Conference opened by Njongonkulu Ndungane, the radical Archbishop of Cape Town who succeeded Desmond Tutu, resolved to demand that the World Bank and International Monetary Fund compensate South Africa for apartheid loans long ago repaid. What is the line of argument?

From 1951-67, the World Bank lent Pretoria more than $200 million, about half of which went to support electricity generation in dirty coal-fired plants. Yet black townships and rural areas were denied electricity due to apartheid.

As late as 1966, the Bank granted $20 million in apartheid loans even after Albert Luthuli and Rev. Martin Luther King called for anti-apartheid financial sanctions. In 1986, the Bank again busted sanctions by indirectly lending to Pretoria, via the Lesotho Highlands Water Project. The IMF continued its apartheid lending into the early 1980s, including $2 billion in loans after the 1976 Soweto uprising began hurting Pretoria’s credit rating.

After the IMF was prohibited from lending by the U.S. Congress in 1983, it continued to give the apartheid state economic advice: to adopt “neoliberal” (free market) policies during the late 1980s and early 1990s, including privatization, extremely high interest rates, export-oriented strategies and the unpopular Value Added Tax.

Freedom rang on April 27, 1994, the day of the first democratic voting ever in South Africa. But a few months earlier, the IMF had ensured an unsatisfactory, partial liberation, through the vehicle of a December, 1993 $850 million IMF loan signed by the interim government, known as the Transitional Executive Council (TEC), purportedly for “drought relief” (eighteen months after the drought ended).

That loan bound Pretoria to cutting government deficit spending (from 6.8% to six percent of GDP in 1994) and reducing wages. The conditions were kept secret until a Business Day leak in March 1994. That newspaper’s top financial journalist concluded that “The Reconstruction and Development Programme [RDP, the ANC’s populist campaign platform] and the TEC statement of policies to the IMF are arguably the two most important clues on future economic policy …. The ANC, in signing the statement of policies to the IMF, committed itself to promoting wage restraint.”

The progressive sections of the RDP were subsequently ditched. Then there was a $46 million World Bank loan to promote exports in 1997, and more tens of millions of dollars invested in South Africa during the past five years by the Bank’s private sector subsidiary, the International Finance Corporation.

These investments include stakes in Dominos Pizza, in for-profit health care, in housing securities to make high-income people’s homes more affordable, and in infrastructure privatization, none of which fight poverty (and all of which add a U.S. dollar liability to South Africa’s stressed current account).

More importantly, dozens of Bank missions have given policy advice to post-apartheid government departments. The missions invariably promote “market- oriented” strategies which undermine the positions of the poor, women and children, the elderly, disabled people and the environment.

Privatization and Pit Latrines

To illustrate, the first major policy paper to which the Bank contributed was the Urban Infrastructure Investment Framework, in late 1994. That document called for pit latrines, not proper toilets, for households with an income of less than $110 per month, who account for a quarter of urban residents and nearly two- fifths of rural folk.

The logic was simple: As water prices rise to market levels, poor people can’t afford to flush. Denying the poor even a small amount of water — the RDP calls for a free fifty liters per person per day “lifeline” — can only be done by pushing people into segregated pit latrine settlements far away from town and job opportunities.

The Bank’s 1999 “Country Assistance Strategy” bragged about its “instrumental” role in post-apartheid water pricing policy. One Bank economist egged on the government to approve cutoffs of household water supplies, which increased to unprecedented levels beginning in 1997.

What does this mean on the ground, in Trevor Ngwane’s Soweto?

In Johannesburg, the city manager budgeted to spend millions of dollars on pit latrines last year, using municipal privatization proceeds. Ngwane fought the privatization and pit latrine policy, and for his troubles was suspended from the ANC (for which until last September he served as regional chairperson).

Ngwane is currently an independent councillor, enjoying extremely strong grassroots support but facing local government elections in November against a hostile Johannesburg ANC.

The problems Ngwane describes are not limited to ongoing socio-economic indignity and a new kind of apartheid based not on the race line but the water and sewage line. In addition, public health and environmental hazards are emerging.

North of Pretoria, a similar early 1990s pit latrine plan led to dramatic outbreaks of cholera and typhoid because of the E.coli bacteria, which enters the water table through excrement. For that reason, Jo’burg’s privatization framework –- “Egoli 2002,” after the Zulu translation for City of Gold — was redubbed by Ngwane and trade unionists “E.coli 2002.”

Thanks to the Bank, whose top Pretoria staff and consultants are also advising Jo’burg on privatization, Africa’s richest municipality is fouling the environment and threatening the public health, and in the process transferring more caregiving responsibilities and costs to women.

The same development disaster is underway in rural areas, where Bank advice was central to the failed land redistribution plan adopted in 1994. Instead of thirty percent land redistributed, as the RDP mandated, the ANC government achieved less than one percent, because the minister — subsequently fired — followed the Bank’s free-market logic even in a context of the worst inequality in the world.

The identical land distribution problems Zimbabwe currently faces are now being seeded on parched, free-market turf in South Africa — with the same Bank staff doing the gardening.

ATC 87, July-August 2000