You could say Brian Molefe was one up against his potential adversaries when he threw those bombastic attacks at Bretton Woods institutions, the IMF and the World Bank, during his speech at the 5th BRICS Summit in Durban.
Transnet CEO, Molefe, launched his sharp attack on the eve of a historic partnership between Transnet and the China Development Bank. A statement released by Transnet said the state owned transport and logistics utility has clinched a ground breaking agreement with the China Development Bank, one that will propel and diversify Transnet’s sources of funds for its R300bn infrastructure development programme.
On Monday Molefe launched what could pass as a blistering attack against the western dominated global funding institutions, the IMF and the World Bank.
He suggested that the IMF and the World have prevailed on the global financial systems to cause pain.
“The consequences, especially the poor indebted countries have been catastrophic. As Joseph Stiglitz observed, the fund has compounded existing crises where they did not exist before. It has destabilised exchange rates, exacebated balance of payments problems, forced countries into debt and recession and destroyed jobs of tens of millions of people”.
Commenting on the agreement which was signed at the Union Buildings in Pretoria, Molefe said “This historic agreement between two state-owned entities within BRICS illustrate the opportunities inherent is such diplomatic ties. The agreement will enable us to explore innovative funding options as we pursue our borrowing plan focusing on cost effective solutions and diversity.”
Transnet and China Development Bank agreed to cooperate, explore and identify future collaboration in Transnet’s infrastructure upgrade programmes.
The cooperation includes, but is not limited to, the financing of the construction and upgrade of railway, and port infrastructure, localisation of equipment manufacturing – especially rail and port. In addition, the two agreed on future collaboration on research and development initiatives, manufacturing, marketing and the construction of cross border infrastructure throughout the continent.
Transnet characterised the agreement as one of the various country-to-country collaboration agreements intended to strengthen economic and trade relations among the different BRICS countries.
South African President, Mr Jacob Zuma, his Chinese counterpart, President Xi Jinping and Minister of Public Enterprises, Mr Malusi Gigaba also witnessed the signing of the agreement.
Last year, Transnet announced an unprecedented R300 billion investment programme, the Market Demand Strategy, to revamp and expand its ports, rail and pipelines infrastructure and equipment. About two thirds of the required funding will be raised from internal resources while the remainder will be raised through various sources in the debt capital markets.
As part of the investment programme, Transnet has awarded various equipment manufacturing contracts to Original Equipment Manufacturers, including the United States’ General Electric, Finnish crane maker Kalmar and China South Railways.
Here follows extracts from Molefe’s speech presented in Durban.
At the UN Britton Woods conference of 1944, Jim Keynes proposed the formation of the International Clearing Union (a global bank).
He’s original proposal was based in equality among the members of the union. He even warned that it would be a catastrophe if any of the member countries were to dominate the clearing union.
The union would persuade creditor nations to spends their surplus money back into the economies of debtor nations.
Commenting on this idea, the British economist, Lionel Robbins reported that it would be difficult to exaggerate the electrifying effect on thought throughout the whole relevant apparatus of government …nothing so imaginative and so ambitious had ever been discussed.
Economists all over the world saw that Keynes had cracked it. Britain adopted Keynes solution as its official negotiating position.
But one country at the time, the world’s biggest creditor opposed the idea. Harwy Dexter White, head of the American delegation at Bretton Woods responded thus: “We have been perfectly adamant on that point. We have taken the position of absolutely no.”
Instead, the US proposed the International Stabilisation Fund, which would impose no limits on the surplus that successful exporters could accumulate.
The USA prevailed. The International Stabilisation Fund became the monetary fund. The International Bank for Reconstruction became the World Bank.
The consequences, especially the poor indebted countries have been catastrophic. As Joseph Stiglitz observed, the fund has compounded existing crises where they did not exist before. It has destabilised exchange rates, exacerbated balance of payments problems, forced countries into debt and recession and destroyed jobs of tens of millions of people.
Harwy Dexter White also succeeded to award the US special veto powers over any major decision made by IMF and World Bank.
In 2012, the G20 admitted that “the Bretton Woods institutions must be completely refunded”. As Geoffrey Crowthen – then editor of The Economist magazine. – warned in 1944, “Lord Keynes was right…the world will be bitterly regret the fact that his arguments were rejected.
70years later, developing countries areo talking about the formation of a bank for the poor and