South African business leaders said on Tuesday that Pretoria’s decision to invest 2 billion U.S. dollars towards the International Monetary Fund’s (IMF’s) firewall fund is “positive and necessary.”
Pretoria made the announcement as the G20 leaders met in Mexico concurred to increase the resources of the IMF so that it can serve as a backstop in the event of further deterioration in the eurozone situation.
Business Unity South Africa (BUSA) deputy Chief Executive Officer Raymond Parsons said the move is “sensible investment.”
“BUSA sees the decision for South Africa to contribute two billion dollars to the IMF’s firewall fund as a positive and necessary one in present global economic circumstances,” Parsons said in a statement.
Formed in 2003, BUSA represents South African businesses on macro-economic and high-level issues at national and international levels. Its main function is to ensure that business plays a constructive role in the country’s economic growth, development and transformation.
Announcing the investment earlier Tuesday, the Presidency said the funds would be considered part of South Africa’s foreign reserves. The funds will be invested and earn interest, and would only be drawn down in emergency circumstances, according to the Presidency. If the funds are drawn down, they will ultimately be repaid and they will continue to earn interest over this period.
“The loan to the IMF only represents about 4 percent of South Africa’s forex and is a loan on which the country will earn a return and which will eventually be repaid. It could be seen as a sensible investment for a small part of our forex,” BUSA said.
Parsons said the move is inevitable if Pretoria is looking to advance its influence in global agenda-setting structures like the G20, BRICS and the IMF.
“That (move) is seen to be making an additional financial commitment at this critical juncture in world economic affairs. Although it is a relatively small amount in the total scheme of things, it sends out a strong message that South Africa recognizes the interdependence of the global economy and the need for collaborative action to keep it stable,” Parsons said.