Since February 19, a battle has raged over who pays taxes to Pretoria and for what, a technical and political fight about state finances that has never been so intense in post-apartheid history. The first victim was Finance Minister Enoch Godongwana’s desire to raise the Value Added Tax (VAT) on all consumers by 2%, to 17%. On March 12, he compromised with critics, imposing a 1% hike, spread over two years. The alleged need for budget cuts is also harped on endlessly by neoliberals, though Godongwana is facing constraints imposing the degree of austerity he would like to, leading to some speculation there is a potential policy shift.

Leftwing forces remain furious, because instead of VAT hikes, they demanded the restoration of a corporate tax rate which has nearly halved (to 27%) since 1992 – because that generosity starting in Nelson Mandela’s African National Congress (ANC) presidency resulted in lower rates private investment than during the 1965-90 period – and imposition of a wealth tax that would mainly hit beneficiaries of the country’s pre-1994 official white racism, in what remains the world’s most unequal society. The richest 10% of South Africans own 85% of the country’s wealth.

But even the ANC’s main governing partner since last June – the centre-right, pro-corporate Democratic Alliance, which achieved 22% of the vote last May as against the ANC’s 40% –  

For that battle we must thank an exceptionally powerful – and no longer quite so shadowy – organisation from Washington reputed the world over for yanking the chains of finance ministers and central bankers: the International Monetary Fund. Indeed the term ‘IMF Riot‘ is used, as former World Bank chief economist Joe Stiglitz explained, when the institution’s economists “squeeze the last pint of blood out of [debtors]. They turn up the heat until, finally, the whole cauldron blows up.”

South Africa is not yet at that point. Still, protests against the budget occurred first on February 19, and then when Godongwana backed down and was told not to try pushing up the Value Added Tax by 2% as he had planned that day. 

The IMF’s demand for ‘fiscal consolidation’ was referred to 17 times in documentation for the unnecessary mid-2020 Covid-19 loan of $4.3 billion, and 37 times in its most recent marching orders to Godongwana just six weeks ago. The IMF itself admits the two words fiscal consolidation are “a euphemism for government action to reduce fiscal deficits and hence public debt,” which can be done via spending cuts or tax increases or both.

With the Democratic Alliance now cosplaying as a faux-populist critic of Value Added Tax hikes, and with civil society forces repeatedly protesting Treasury’s austerity mentality, the left pincer is trying to save the state from its scheduled double-digit (2020-26) cuts in per person budgeting.

Godongwana’s rebuttal is that this year he intends raising new finance, not chopping programmes: “We have been [giving] budget cuts for a number of years and they’ve not achieved the desired outcome… The problem is that there’s this notion that you can have endless cuts, which are self-defeating, and you end up reducing the very thing you want to utilise – government investment in infrastructure.”

Regardless of Godongwana’s spin-doctoring, some such funding is still being whittled back, such as his 58% ‘real’ (after-inflation) infrastructure cuts for our 26 public universities (disclosure: I teach at one, and like nearly all others, our facilities are extremely stressed, with acute accommodation shortages suffered by working-class students all over the country). 

Godongwana’s entire 2025 post-school budget is up less than 1% from 2024, but then we must factor in the 4.4% inflation rate and 1.33% population growth (and an even higher eligibility level for tertiary students, given much higher matric pass rates last year), causing a real 6.7% per-student cut. Godongwana also maintained the state’s bursary means-test (eligibility level) ceiling at R350 000/year for parental income; but it should now be R462 000 to have kept up with 2018-24 inflation. 

In contrast to student #FeesMustFall activists demanding universal access, the IMF advocates a redirection of spending (‘better targeting’) away from “the growing allocation of resources to tertiary education subsidies, which largely benefit better-off students and crowd out crucial spending on basic education.” 

No, the bursary means test representing most new funding since 2018 already limits recipients to working-class and poor children, but regardless, this is a classic divide-and-conquer technique: replacing what should be a ‘both/and’ with an ‘either/or.’ And in reality, instead of a ‘growing allocation,’ Godongwana’s Treasury has radically shrunk the bursaries, leaving tens of thousands of students hungry and angry. 

Even more destructive and no doubt deadly is Godongwana’s 3.5% cut in real spending on district-level HIV/AIDS and TB, down to R25 billion, at a time USAID’s shock PEPFAR cuts last month suddenly left this vital sector R8 billion short of funds. (In contrast, Godongwana allocated R5 billion over three years to the SA National Defense Force’s collapsed eastern-DRC mission, at a time the hapless army lads – especially the majority now stranded at the Goma airport – were named the #1 sexual abusers among United Nations ‘peace-keepers.’ Nevertheless, jingoistic macho militarists successfully lobbied Godongwana for a 39% real funding increase on October’s budget.

Enter the IMF’s ‘iron lady,’ stage right

The budget’s brutal chops, worsened by radical contraction in overseas aid from the U.S. State Department as well as British and European agencies, are amplified by another Washington institution that desperately needs reform. The IMF’s current South Africa ‘mission chief’ Africa is Washington-based Delia Velculescu, who hails from Transylvania (home of the vampire Vlad Dracula). According to the Guardian, “the Romanian economist chosen to lead the IMF’s negotiating team in Greece, was dubbed the ‘iron lady’ during the fraught talks over Cyprus’s bailout.”

Then, as Greece was going through economic hell in the mid-2010s, WikiLeaks founder Julian Assange published a confidential phone call transcript between her and another IMF official, revealing the importance of a ‘credit event’ precipitating a Greek fiscal crisis to achieve the desired change. Asked Velculescu’s boss, “What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default.” She replied, “I agree that we need an event, but I don’t know what that will be.”

In response, former Greek Finance Minister Yanis Varoufakis recalled how he quit in 2015 once the IMF and European Union squeezed his president Alexis Tsipras to reject a successful national referendum against IMF/EU austerity. Departing with that surrender were his alternative “policy proposals to end austerity, target the oligarchy, and reform public administration (rather than attacking, again, the weak)… allowing Greece to recover without further social decline.”

Instead, Varoufakis testified, the IMF and specifically Velculescu continually demanded “crushing new austerity which is inhuman and unnecessary but which, today, the Tsipras government (according to Velculescu) seems ready to accept, having already surrendered once in July 2015. The IMF’s austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society’s weakest, and turbocharge the humanitarian crisis… For decades, whenever the IMF ‘visited’ a struggling country, it promoted ‘reforms’ that led to the demolition of small businesses and the proletarisation of middle-class professionals.”

During her repeated visits to South Africa last year, Velculescu helped to craft various IMF documents (published on July 31, September 4, November 28, January 27 and January 30) insisting – more than 100 times, and typically graced with the adjectives ‘ambitious’, ‘necessary’, ‘well-defined’, ‘larger’ – that Godongwana impose fiscal consolidation.

(Again, an academic disclosure: like Velculescu, I also did my PhD at Johns Hopkins University, though mine was in economic geography because of the extreme neoliberal dogma featured in the school’s economics department. I’d attended Hopkins right after the Wharton School of Finance – spending two years in Philadelphia halfway between Donald Trump’s and Elon Musk’s ‘education’ there – and the full extent of the market-friendly, thoroughly-fraudulent, financial engineering taught at such prestigious U.S. universities is now on display.)

Blame Washington’s spin, not just Pretoria’s

But after the dramatic rejection of Godongwana’s February 19 budget from both the left and centre-right, Velculescu’s latest co-authored article – two days before his latest budget – turned devious: “Building broad social support for reform efforts is essential to achieve their full benefits. Recent IMF analysis highlights that communication and engagement, along with policies to support vulnerable groups, are vital to increase acceptance of reforms. For example, providing information about the cost of electricity in South Africa, which is 68% higher than in the US, was found to boost support for electricity reforms by 9 percentage points.”

Utility privatisation is one of the IMF’s predictable ‘reforms,’ no matter its repeated, ongoing failures here. Treasury’s fiscal stress and that 68% electricity price premium, for example, stem directly from Eskom’s massive $3.75 billion (R70 billion) debt due to the World Bank for its 2010 contribution to the Medupi-Kusile skorokoro coal-fired power-plant corruption of the ruling party by Hitachi. The Bank’s largest-ever loan should be canceled as Odious Debt – but such logical remedies are outside the definition of fiscal consolidation, as are higher corporate taxes and a wealth tax, never to be contemplated in Washington circa 2025. 

Velculescu’s other reforms include “halving (sic) South Africa’s business regulation, governance, and labour-market gaps relative to peers,” a rate akin to Elon Musk’s infamous chainsaw now buzzing through the U.S. government.

In another attempt to ‘build broad social support’ for fiscal consolidation, IMF resident representative Tidiane Kinda spoke to critics on Tuesday. He conceded that “austerity needs to be very carefully designed,” but once again specifically attacked the alleged “growing allocation of subsidies to tertiary education,” even though the kids qualify because their parents are poor and working-class. 

The IMF’s most catastrophic recent such attacks on the next generation via fiscal consolidation occurred in Kenya last June. The GenZ kids fought back, and as the Bretton Woods Observer explained, “While accusing the government of making reckless financial decisions, protestors also turned the spotlight on the IMF and World Bank for their role in Kenya’s escalating debt and social crises.” Back in Washington, a degree of humility was observed in the Bretton Woods Institutions’ office cubicles, as Nairobi’s Standard reported: “Gen Z protests now spark global rethink on IMF conditions.” 

Somehow though, Velculescu and Kinda didn’t get the memo. The iron fist and ham-handedness that accompanied the IMF’s bailouts of the apartheid regime right after the 1960 Sharpeville Massacre, the 1976 Soweto uprising and the early-1980s urban rebellions and gold price crash are now making a comeback in Pretoria, cowing Godongwana and his Treasury team, no matter his stated desire to avoid the dreaded word ‘austerity,’ from which logically follow two more: ‘IMF Riot.’

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