APARTHEID DEBT
AS ILLEGITIMATE DEBT

Witness:  M.P. Giyose (South Africa)

The film presented the case of South Africa to explain how certain debts are illegitimate because the contracting parties were illegitimate and the use of the loans contributed to the violation of the human rights of the population.

Apartheid Debt as Illegitimate Debt

The much spoken about miracle of the political settlement of 1994 is not sustainable in the short term never mind the long term. The goal of social upliftment is fast disappearing as the legacy of apartheid conspires to transform itself into an all-consuming monster.  [Visuals of present day South Africa: Failure of housing and land reform the Bredell Case and visuals of the Landless Peoples Assembly in Durban; TAC campaign for AIDS medicines and the refusal of the government to fund anti-retrovirals; The struggle of COSATU against privatisation and job losses]

Enduring poverty, growing unemployment, criminal violence, vigilantism, land occupations are the first warnings of a new flood of social conflict threatening South Africa.

Today, apartheid, which was universally condemned as a crime against humanity lives on through the apartheid debt. [Footage of UN condemnation of apartheid regime]

Credit to the Apartheid government was critical in financing the system that denied the majority of South Africans their humanity, that confiscated their land and homes, condemned millions to live in the human dumping grounds of the homelands, that restricted peoples movement through the infamous pass laws, that detained, tortured and killed the thousands who opposed their system and that through military incursions destabilised South Africa's neighbouring states. [Visuals of forced removals, pass laws and apartheid repression and destabilisation in Angola and Mozambique]

Impact of the Apartheid debt

[CLIPS FROM NEWS ARCHIVES]

In his first budget speech (March 1997) finance minister, Trevor Manuel, stated that  "The first charge against government revenue is interest on government debt. The bigger our deficit, the more we have to borrow, the higher the interest bill and the less money there is available to invest in social development, in poverty relief and in the development of our human resources. It is for this reason that reducing our debt burden is important. It is important because it will free up the resources we need to create a better life for all.

What this means in very simple terms is that for every rand of tax we collect, about 24 cents is spent on interest on government debt. This leaves 76 cents to be divided up between all other government programmes. Clearly this situation is both untenable and unsustainable.

Through these loans the apartheid regime was able to offset the effects of sanctions.

The odiousness of the apartheid state encouraged foreign companies and international financial institutions like the IMF and the World Bank to openly support the regime. The profits for TNCs were amongst the world's highest, interest on foreign loans was repaid easily, and democratic opposition was crushed. Under these conditions, the World Bank began making $200 million worth of apartheid loans in 1951, three years after the repressive Nationalist Party was elected in a whites-only vote. The loans included $100 million in Eskom electricity credits which provided power to white areas, while black townships were without electricity until the 1980s. Because South Africa became an "upper middle income country" in 1967, the Bank ceased lending, and all the loan obligations were discharged within the next two years. However, so as to build several controversial, scandal-ridden Lesotho mega-dams in 1986, the Bank opened up a secret London credit line that effectively served apartheid South Africa as a "financial sanctions-busting" devise (according to the first ANC water minister, Kader Asmal). All of these Bank loans are amongst the high-priority apartheid-era debts that campaigners have begun to highlight as cases that deserve reparations.

What foreign governments and international financial institutions did instead was to rely on the commercial banking system in supporting apartheid. The part played by international banks in actively supporting apartheid lay primarily in short term inter bank loans and trade credits. 

For the apartheid regime as well as their willing bankers, a major attraction of the short-term loans was their anonymity; transactions on the inter-bank credit markets are never published.  Short-term loans thus allowed banks to trade freely with the apartheid state without third parties' knowledge.  For this reason, short-term loans were an ideal sanctions-buster. . [Interview with Fatima Meer, Ndungani or Tutu]

Another sanction busting method of providing credit to Apartheid South Africa was through trade credits. Trade credits provided apartheid with a major form of new credit at a time when international banks were coming under increased pressure to restrict their ties with the international outcast.  Not only did they make it possible to import products, including capital goods for expansion, but they allowed long-term borrowing to take place.  It is for these reasons that the Governor of the Reserve Bank exhorted importers to use foreign credit during difficult foreign exchange periods. [Voice over of Rudin with visuals of sanction demos]

In the light of the debt moratorium announced by the apartheid regime of PW Botha in September 1985, a compelling case can be made against the foreign banks that did business with apartheid South Africa.  In spite of the pressure on the banks to take punitive action against South or to require major political reforms as the price for allowing the apartheid regime to renegotiate its debt, each time a new rescheduling agreement was negotiated, major concessions to Apartheid South Africa were made.

Instead of using their leverage as creditors the banks provided further breathing space to the apartheid regime by granting an extended period for redeeming their stock of debt.

[CLIPS FROM NEWS ARCHIVES]

The ANC was so outraged on the occasion of the third such agreement that they were provoked into condemning the Arrangement as an act of "inhumanity" whose purpose was that:

"of helping perpetuate the evil system of apartheid....  When the time comes, the South African people will not be unmindful of the role of banks in making profit out of the misery of our people."

The culpability of the world banking community in perpetuating apartheid is aptly, if inadvertently captured by the then director of finance and previous Reserve Bank Governor, Chris Stals:

If the world banking community should effectively exclude South Africa from international trade and payments systems, it would be a much more effective sanctions measure than trade sanctions applied by governments.

[CLIPS FROM NEWS ARCHIVES]

Thabo Mbeki in a recent document offers an insightful explanation.

"The Apartheid ruling group imposed on the country an unprecedented debt burden whose acquisition had to do exclusively with shifting the balance of force during the period of transition from Apartheid to democracy, so that this anti-democratic group would not be as weakened, politically, as it would otherwise be, in contradistinction to the democratic movement."  [Interview with Giyose Chairperson of Jubilee South Africa]

(Source: The State and Social Transformation)

No foreign loan granted to South Africa during the apartheid years could have been legitimate because the apartheid state was itself illegitimate; and any attempt to claim ignorance of this fact would not be credible.  This single circumstance means that no lender would have a valid claim against democratic South Africa for any loans outstanding from the apartheid years.

The Sharpeville Massacre of 1960 resulted in the militarisation of the state, a transformation that grew at a phenomenal pace after the Soweto Uprising of 1976. Sanctions-busting, together with its corollary of stock-piling, was also enormously expensive. Loans helped pay for all these costs in a multitude of ways, many of which might appear, at first sight to have nothing to do with apartheid.

A large number of the inter-bank loans, for instance, had no direct connection with apartheid. Yet, the foreign exchange given for a seemingly innocuous purpose - ranging from the development of ESKOM to the financing of a domestic home - was recycled as part of apartheid's sanctions-busting strategy. Similarly, some foreign loans were used for purposes of international trade and, in this respect, were no different from those regularly found throughout the world. Yet, even the seemingly most pristine of these trade loans were tainted by apartheid. The simple fact of trade with South Africa inescapably meant helping to sustain and reproduce the structures, practices and life-styles normalised by apartheid. No loan could avoid this institutional contamination.

Outline of the Doctrine of Odious Debt

Interview with Rudin on the Doctrine of Odious Debt

Conclusion

Interview with Giyose setting out why the apartheid debt must be cancelled, loan repayments returned and reparations made. This is why the debt is illegitimate and why all loans made to dictatorships for oppressing the people are illegitimate. [Visuals of rural poverty, squatter housing as against the wealth of apartheid's agents]

The testimony was in the format of a documentary film. M.P. Giyose was the main resource person in the film.