The ‘World versus Bank’ seen from South Africa

The World Bank has made the world a worse place: socially, politically, economically and environmentally.

By Patrick Bond, Durban

October 11, 2014 -- Links International Journal of Socialist Renewal -- In Washington DC and 10 countries across the globe, protests on October 10 targetted the World Bank during its annual meeting. Many are asking, isn’t 70 a dignified age for institutional retirement, especially for policies and practices long considered destructive but now seemingly back in official favour?

Founded in 1944 to finance war-torn Europe’s reconstruction, the World Bank is now suffering one of its most severe credibility crises, accentuated by a new civil society campaign, "WorldVsBank". South Africa’s three largest cities host teach-ins because this country, after all, was the model "Knowledge Bank" pilot after 1990.

The old apartheid government and its democratic successor both adopted Bank policy advice, but the latter contracted only a dozen relatively small World Bank loans and investments from 1994 until two hugely controversial projects were funded in 2007 and 2010: the Marikana platinum mine and Medupi power plant.

South Africans at the World Bank

Experiences here, recalling the Bank’s early and enthusiastic support for apartheid, help explain the upsurge in anger. Moreover, powerful South Africans Trevor Manuel and Leonard McCarthy have, in very different ways, become responsible for scandals now hot-brewing in Washington.

New excerpts from the "Zuma Spy Tapes" put into the public domain after a long court battle prove McCarthy’s malfeasance as the government’s anti-corruption leader. As one of the country’s most respected journalists, CityPress editor Ferial Haffajee explained in a column this week, “McCarthy was impaled by the seductions of power. He ruined our criminal justice system. I find it breathtaking that he is vice president of integrity at the World Bank.”

The Bank’s ongoing defence of McCarthy’s "integrity" looks suspicious in the wake of the cancelled April 2009 prosecution of South Africa's President Jacob Zuma on corruption charges. This cancellation came as a direct result of McCarthy’s anti-Zuma conspiracy and the spy-versus-spy culture he fostered. The new transcripts reveal Manuel’s apparent endorsement of McCarthy’s job application, even though his Machiavellian manipulation of South African politics and law should have disqualified him. Because of prolific corruption at the World Bank, the job required a "squeaky clean" candidate, McCarthy is heard to remark, so he needed someone to fib in an April 2008 job reference.

A year later, as a loyal ally of Washington, Manuel helped the International Monetary Fund (IMF) raise $750 billion during its last crisis. An oft-mentioned candidate to run the World Bank or IMF, Manuel recently retired from politics and was hired by Rothschilds bank early this month.

To his credit, in 2013, Manuel formally reviewed the World Bank’s controversial Doing Business report and recommended it halt the biased, indefensible country-ranking system. But the Bank has just rejected his advice to drop the ranking system and, worse, is now also in the process of trashing its operational eco-social safeguard protections which were introduced after years of civil society lobbying due to unmitigated Bank project disasters.

Bank loans to the apartheid regime date to 1951, when state borrower Eskom’s generators provided electricity only to white businesses and people (blacks got none). The Bank neither apologised nor paid reparations for empowering apartheid, but instead kept lending until South Africa achieved middle-income status in 1967, in spite of economic sanctions calls by Albert Luthuli and Martin Luther King in 1962.

The IMF also lent billions to the Pretoria regime during financial crises that were in part caused by pro-democracy activism in 1976 and 1982. After anti-apartheid financial sanctions hit Pretoria hard in 1985, neighbouring Lesotho’s corrupt Lesotho dam was another route the World Bank used to fund apartheid, resulting in long-lasting problems for displacees.

South Africa finally democratised during the 1990s, and the World Bank played a crucial role in many areas of public policy. Worsening inequality, poverty and unemployment followed directly from Knowledge Bank advice, such as the GEAR macroeconomic policy and neoliberal water pricing that was "instrumental" in causing mass disconnections of water to poor people and, in turn, KwaZulu-Natal’s cholera epidemic. Yet President Nelson Mandela, facing severe pressure from big business, adopted numerous ineffectual Bank strategies.

Fingerprints at the scene of the Marikana massacre

In the same vein, more recent World Bank activity includes generous financing of the London mining house Lonmin’s Marikana platinum operation, including the supposed construction of 5000 houses for workers. South Africa's deputy president Cyril Ramaphosa, the 9-per cent "Black Economic Empowerment" owner of Lonmin in 2012, had meetings and sent urgent emails to the minister of police asking for "more pointed" action against the wildcat strike. The next day, 34 workers were murdered by police. Two years later, Ramaphosa admitted to a state commission of investigation into the massacre that he was the Lonmin director responsible for the housing program, and that only three show houses were built.

Yet in its "sustainable investments good practices handbook", the World Bank bragged of Lonmin’s "Rekopane Development Forum" without apparent irony. “The company hasembarked on a multi-stakeholder effort to helpbring prosperity and sustainable development to the local communities in which it operates. Alongside Lonmin, there are three key stakeholder groups – the traditional authority, local government, and local mining companies – that share the same vision for socioeconomic development.”

Thumeka Magwangqana is the leader of the main women’s group in Marikana’s shack settlement, Sikhala Sonke. This week she told me she had never heard of either the World Bank’s Lonmin projects or the Rekopane Development Form. As for the "vision" shared by Lonmin’s power-bloc "stakeholder" allies, “We the women of Sikhala Sonke never got anything from them. Last year, Lonmin told us they would give us a crèche (childcare) building – but no stipends for us to work there. We are still waiting.”

The World Bank’s chutzpah regarding Lonmin reflected its ignorance of the main social auditing project in Marikana, the Bench Marks Foundation set up by the progressive faith community, which in 2007 recorded vast socio-economic backlogs in its report The Policy Gap.

Five years later, in the immediate wake of the 2012 massacre, the World Bank’s internal Compliance Advisor Ombudsman (CAO) began a tokenistic investigation. Though acknowledging “concerns as to the adequacy of performance in relation to this investment” and also “potentially more systemic issues regarding the way in which the Sustainability Framework was applied”, the CAO found no link between the Bank’s stake in Lonmin, its miserable labour, community and environmental policies, and the firm’s decision – aided by Ramaphosa – to call in murderous police against striking workers. “CAO decides that an investigation is not warranted and closed the case.”

But that won’t end the controversy. The day after the massacre, the Center for International Environmental Law in Washington recommended that the World Bank reconsider further extractive industries investment given such conditions – but to no avail. Two weeks later, bank president Jim Yong Kim travelled to Johannesburg but neither visited nor even mentioned Marikana.

The World Bank's biggest loan for the biggest coal-fired powerplant under construction

Kim, an anthropologist-medic, had co-founded the path-breaking NGO Partners in Health and ran World Health Organisation AIDS programs. As a Harvard academic, the book Kim co-edited in 2000, Dying for Growth, demolished neoliberal World Bank policies. But during his South Africa trip, Kim praised the bank’s biggest-ever project loan – $3.75 billion for Eskom’s Medupi power plant – as "clean coal", all evidence to the contrary notwithstanding. Medupi will emit 25 to 35 million tonnes of CO2 per year, more than do 115 countries.

Who benefits? Instead of restructuring BHP Billiton’s Special Pricing Agreement with Eskom, which over the last 22 years has provided the world’s largest mining house with up to 10 per cent of South Africa’s electricity at just US$0.01/kWh (a 10th as much as poor people pay), the World Bank’s loan repayment model includes price hikes of more than 100 per cent to household customers, even though the loan was allegedly assisting in fighting energy poverty. Government’s most recent survey of energy use predicts that Eskom price hikes will force 37 per cent of low-income people to return to dirty household energy like wood, coal and paraffin.

The coal-fired fiasco is a symbol of the World Bank’s mega-project bias. In February 2010, the South Durban Community Environmental Alliance (SDCEA) had called for a global campaign to halt the bank’s Medupi funding, because of its climate-wrecking, poverty-creating corruption. SDCEA coordinator Desmond D’Sa, winner of the 2014 Goldman Environmental Prize for Africa, played a leadership role in the 400 000-strong People’s Climate March in New York last month. He asks, “Should we again launch a World Bank Bonds Boycott, to get investors to run on the Bank?”

Writing in the Guardian, Archbishop Emeritus Desmond Tutu last month repeated his call for climate to be the basis for financial divestment. The World Bank is a logical target, since it continues fossil financing (with a major shift now to fracking), carbon trading and other "false solutions" to the climate crisis – a crisis for which it is inordinately responsible as the world’s largest historic fossil fuel lender.

The last time the World Bank faced such hostility was when 30,000 global-justice activists gathered at their April 2000 Washington meeting. At the time, independent Johannesburg city councilor Trevor Ngwane – who subsequently co-founded the Soweto Electricity Crisis Committee – taught the crowd "toyi-toyi" protesting. Inside, World Bank board chair Manuel attempted to cover up (not fix) the flaws, as revealed in the SABC Special Assignment documentary, Two Trevors go to Washington.

What, then, should be done about this institution, especially given its surreal links to South Africa? The World Bank has made the world a worse place: socially, politically, economically and environmentally. Since elites don’t have a clue how to reform the World Bank, it’s time again for civil society to debate options and then hit the streets. In Washington and other cities, people will learn more, and many will join the WorldVsBank.

Postscript: How did the World Bank Hire Leonard McCarthy in April 2008?

The "Spy Tapes" associated with the bungled 2008-09 prosecution of Jacob Zuma reveal the tortured logic in Leonard McCarthy’s departing his job as South Africa’s main anti-corruption official, and becoming World Bank vice-president for "Integrity" ("INT") in May 2008.

How was World Bank president Robert Zoellick so readily bamboozled, when hiring McCarthy to oversee the fight against prolific corruption on bank projects? Some of the highest profile work of McCarthy’s bank predecessors, after all, involved mega-dams supplying Johannesburg with water from neighbouring Lesotho, implicating a dozen multinational corporations including construction companies close to South Africa’s ruling party. The same companies later admitted to massive corruption in price collusion when building the 2010 soccer World Cup stadiums.

Did the World Bank’s favoured South African politician, Trevor Manuel, fib in the April 2008 job reference he apparently gave Zoellick on behalf of the Scorpions chief, at a time he knew McCarthy was embroiled in what was later declared to be an illegal conspiracy against Zuma?

In late 2007, McCarthy was positioning his agency to charge Zuma with 783 counts of corruption. But those charges (potentially still valid) were dropped by the National Prosecution Authority just before the 2009 election, easily won by Zuma, because of the conspiracy pretence that emerged from the earliest Spy Tapes revelations. In short, McCarthy’s undeniable lack of integrity set South Africa on a course of fast-declining political morals.

The penny had dropped on December 19, 2007. The day before, Zuma was elected African National Congress president in a major showdown with the country’s then president, Thabo Mbeki. This defeat came as a huge surprise to McCarthy, for whom Mbeki would, he told him, ‘always be my president.’

But once the balance of forces within the ruling party had shifted dramatically, McCarthy and former National Director of Public Prosecution Bulelani Ngcuka (whose wife had replaced Zuma as the country’s deputy president in 2005 because of the widely believed corruption allegations) had a frank talk on December 19. According to Spy Tapes transcripts, it began with an SMS from Ngcuka, his close confidante:

BN: From now onwards you are on your own. It is imperative that you finalise your future plans pronto.

Then they had a phone conversation a minute later:

BN: What I meant about my message: it is important that you sort out where you are going, immediately. And I think that the sooner you get out of that place, the better. Let them [presumably Mbeki and his allies] sort out their mess, this is not your responsibility, they want to sort out the mess, let them sort it out themselves. There will be nobody covering your back, you are exposed completely, and I don’t think you deserve that.

LM: I am still shocked.

McCarthy then talked to Mbeki and the country’s justice minister. Although McCarthy had already prepared court documents against Zuma, he waited until the 28th of December because it would look too suspicious to file them in the immediate wake of Mbeki’s defeat.

Three months passed. The phone transcript between McCarthy and his friend Ngcuka on April 3, 2008 is revealing:

LM: You know, I am beginning to wonder whether I have committed offence, an offence or something.

BN: You have, you know, you have made a serious offence, you know.

LM: This ah, I have browsed.

BN: I am just arrived. I have been out of the country, Azerbaijan. And I, I met with the guys from Ukraine. And the guys from the Ukraine were saying ‘Mr Pikoli, he is the best dancer in the world’ [referring to former National Prosecuting Authority chief Vusi Pikoli].

LM: No alright, let me not keep you. I just want to run something by you very quickly. Um, and I actually don’t care these days who is listening to the phone as well. I was approached by the World Bank, for this position.

BN: Ja.

LM: To head up the INT, previously you know so they approached me again and we went through a whole process of interviews. And last night they called me to say, no they liked my face.

BN: Ja.

LM: The president called me, ah Zoellick.

BN: Ja.

LM: It is quite a prestigious position there, it’s like a vice president, or so. There is still the option open of a contract [to stay in SA]. But I mean this looks obviously much more attractive.

BN: That’s very nice.

LM: Now, they want to speak to you.

BN: To me.

LM: Yes, because I have given you as a reference. But I said I have not primed the references, until obviously you wait until you hear what they say. So, they want to talk to you and Trevor [Manuel]. But I don’t need is for people to talk shit about me. I am worried that all these things that are going on around now might hurt my international chances. Because they are looking for a guy who is squeaky clean.

BN: No, no, go for it.

LM: It’s fine, do you have, do you have access to Trevor.

BN: Ja, what must I do.

LM: I am trying to see the president this weekend. Because I said to Zoellick, you know. When I saw the president, I told him that you will call him. I just want to see the president first. But I, he definitely wants to speak to Trevor. Although in fairness, I have not put him up as a reference. We are not that close.

BN: Trevor serves on the board.

LM: Huh.

BN: Trevor serves on the board.

LM: Ja, but, someone needs to [brief] Trevor. I am asking you a favour.

BN: I will speak to him.

LM: Hum.

BN: I will speak to him, I will call him.

LM: Say Zoellick wants to talk to him about the vice president of INT. They want to announce it next week. But it is all very, very discrete at the moment

BN: Ay, it will be nice to have a friend in Washington. I am already coming to spend my holidays there.

[Patrick Bond directs the UKZN Centre for Civil Society, one of the teach-in locales. A version of this article initially appeared at the South African Civil Society Information Service.]