WORLD BANK LOAN SPARKS BACKLASH

Wed 18 June 2025:

The R26.5 billion loan, intended for infrastructure reform, has been welcomed by the government but condemned by the country’s largest trade union federation as a “dangerous Trojan Horse.”

A recently approved R26.5 billion (US$1.5 billion) World Bank loan to South Africa has ignited a sharp division between the government and organised labour, with one side praising it as a vital tool for economic growth and the other denouncing it as a path to privatisation and increased foreign debt.

The loan, officially titled the Infrastructure Modernization for South Africa Development Policy Loan, was approved by the World Bank’s Board of Executive Directors to support what it calls “critical structural reforms” in the country’s beleaguered energy and freight transport sectors. According to the World Bank, the funds are aimed at improving energy security, increasing freight transport efficiency, and supporting a transition to a low-carbon economy.

Finance Minister Enoch Godongwana welcomed the financing, stating, “This loan represents another important milestone in our government’s commitment to transforming South Africa’s infrastructure into a more efficient, competitive, and sustainable foundation for growth.” The World Bank projects that the reforms supported by the loan could create 250 000 jobs by 2027.

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SAFTU Rejects Loan, Citing Privatisation Fears

In stark opposition, the South African Federation of Trade Unions (SAFTU) has vehemently rejected the loan. The federation, along with the Cry of the Xcluded, argues that the agreement will deepen the country’s reliance on foreign creditors and push a neoliberal agenda.

SAFTU General-Secretary Zwelinzima Vavi warned that the loan signals a return to controversial structural adjustment programmes. “We think that this is basically a return to the structural adjustment programmes that are being pushed by the Bretton Woods Institutions… which is a push for commercialisation and privatisation,” Vavi stated. He further expressed concern that a “debt denominated in foreign currency exposes us to massive exchange rate and risk and the austerity budget cuts disguised as fiscal consolidation.”

The federation views the loan’s conditions as a “Trojan Horse” designed to open strategic public infrastructure, such as Eskom and Transnet, to “profit-seeking corporations,” leading to potential job losses and the erosion of state-owned enterprises. SAFTU’s official statement detailed a long history of what it considers damaging interventions by the World Bank and IMF in South Africa, dating back to the apartheid era.

The government and the World Bank maintain that the reforms, including unbundling Transnet and opening the power sector to private investment, are essential for attracting new technology and financing. This latest World Bank loan follows previous financing aimed at the country’s COVID-19 response and its energy transition. While the government points to successes like the reduction in load-shedding, opponents see the continued acceptance of the World Bank loan as a continuation of policies that have failed the poor and working class.