SA bails out Zimbabwe to tune of R900m

MPs are expected to grill the Reserve Bank today over reports that it will transfer a $100-million (R914-million) loan to Zimbabwe.

Tendai Biti, Zimbabwe's finance minister, announced that South Africa had approved the amount as budgetary support for his cash-strapped country, helping plug a gap in its finances ahead of elections expected in the second half of this year.

Biti's ministry asked South Africa for a loan in September, reportedly to reduce Zimbabwe's budget deficit.

Biti told a press conference yesterday: "Pursuant to discussions in September, I'm aware that the South African cabinet has made a decision and it's a positive decision."

The loan is controversial, being granted amid a flurry of reports of intimidation and arrests of opponents of President Robert Mugabe ahead of the elections. Mugabe has also vowed not to allow Western observers to monitor the vote.

National Treasury spokesman Phumza Macanda said the South African and Zimbabwean governments were discussing the loan and its terms but refused to comment further.

"The [loan is] aimed at increasing liquidity in the [Zimbabwean] financial markets and offering longer-term loans to small and medium-size enterprises," Macanda said.

"We are therefore not in a position to discuss the talks."

Though the Treasury has refused to discuss the loan, or state when the money will be transferred, Nick Koornhof, COPE's spokesman on finance, said the loan would top the party's list of questions to the Reserve Bank when its representatives appear before the parliamentary portfolio committee on finance today.

The Reserve Bank was, before yesterday's loan reports, scheduled to appear before the committee to present its quarterly review.

"We have a finance committee meeting [today] and I intend to raise it with the committee that we will ask the Treasury to at least give us all the set of conditions [attached] to that loan, and what it is for.

"Is it intended for election purposes? How will they monitor that and why did it take so long to resolve this matter? Were there things we don't know about?"

Koornhof said COPE was likely to direct similar questions to the Reserve Bank.

David Ross MP, the DA's spokesman on finance, said his party would also ask the Reserve Bank about the implications of the loan.

His colleague, Tim Harris, said: "We believe that the finance minister has a duty to convince South Africans that any financial support provided to Zimbabwe needs to be conditional on the money being spent on specifically defined projects that will improve the prospects of real democracy in Zimbabwe through free and fair elections.

"Under no circumstances should we tolerate extending a credit line without strict political conditions."

Though knowledge of the loan conditions is sketchy, the cash injection is being made at a time when South Africa's own finances are stretched.

Weaker economic growth adversely affected tax revenue in South Africa during the past year.

SARS announced this month that revenue collection was R12-billion below the target proposed in the previous year's Budget.

In 2011, when the Treasury approved a R2.4-billion bailout for Swaziland, ostensibly to force its ruler, King Mswati III, to introduce political reforms, public pressure forced the government to reveal all the conditions of the bailout.

Zimbabwe's economy has been on the mend since President Robert Mugabe and Prime Minister Morgan Tsvangirai agreed to share power after disputed 2008 elections but it is still suffering from a hangover after a decade-long recession widely blamed on Mugabe.

With the Treasury making it clear that discussions between the two countries were not for public consumption, reports hinted that Zimbabwe - which voted on its constitutional referendum last month - needed the money to fund its forthcoming elections.

Biti said the elections will cost $132-million.

He said Zimbabwe borrowed $40-million domestically to fund the referendum, despite the country's weak economic position.

"We essentially raped the economy for the referendum," he said, adding that the funds could otherwise have been lent to companies to increase production.

But, despite all parties voting in the referendum, human rights and pro-democracy groups said more than a week ago that election intimidation by Zanu-PF supporters was mounting.

In March, Zimbabwe rebuffed calls for Western observers to be allowed to monitor the elections, citing the sanctions applied against Mugabe and his acolytes.

Yesterday, Paul Hoffman, director of the Institute for Accountability in Southern Africa, said: "The human rights record of Zimbabwe suggests that we should not touch them with a barge pole."