17 April 2012
Finance Minister Pravin Gordhan said South Africa would continue to push for more reform of global financial institutions as the World Bank picked the US candidate for its top post on Monday.
Gordhan spoke to reporters in Johannesburg hours before the World Bank’s executive board picked Dartmouth University president Jim Yong Kim, who was nominated by the US. The other candidate was Nigerian Finance Minister Ngozi Okonjo-Iweala, who was supported by South Africa and other African and developing countries.
A third candidate, former Colombian Minister of Finance Jose Antonio Ocampo, withdrew on Friday and threw his support behind Okonjo-Iweala. However, even she acknowledged on Monday that her candidacy would probably fail.
Kim was expected to get the bank’s presidency, which has always gone to an American. Its sister institution, the International Monetary Fund, has always been led by a European. Developing nations say the choices should be based on merit, not geography, as part of broader reforms to make the institutions more representative and democratic.
South Africa holds one of the three African seats on the 25-member World Bank board.
‘Some progress, but not enough’
Gordhan said some progress has been made, pointing out that any country was able to nominate a candidate for World Bank president this year.
“It’s no longer in the smoke-filled rooms of Europe and the United States that the spoils are shared,” he said of the nomination process. But he indicated he was concerned that “established powers” would determine the final choice.
When it comes to questions of transparency and whether choices are based on merit, “I think we’re going to find that the process falls short.”
“There’s a lot more reforms to come,” Gordhan said, calling the World Bank and the IMF institutions “that are supposed to be serving the world’s poor.”
Among the reforms South Africa would be pushing for was more African representation on the IMF board.
Africa has ‘shown we can contest this thing’
Okonjo-Iweala, speaking in Abuja on Monday just before the decision was finalized, said she probably wouldn’t be the pick for the World Bank.
“You know this thing is not really being decided on merit,” she said. “It is voting with political weight and shares, and therefore the United States will get it.”
However, despite saying she received pressure to bow out of the process, Okonjo-Iweala said her candidacy had made an impact in the process.
“We have shown we can contest this thing and Africa can produce people capable of running the entire architecture,” she said.
G20 finance ministers meet on eurozone
Gordhan heads to Washington this week for a meeting of G20 finance ministers and central bank governors. On Monday, he said the key question at that meeting would be “whether we are any closer to having definitive answers, not temporary answers, on the eurozone crisis.”
He said there was concern whether the IMF had adequate resources to help Europe, and whether Europe itself was doing enough to keep the crisis from spreading.
“The traditional pool of growth is not operational now, nor will it be for a significant period,” he said.
South Africa’s own efforts to increase growth and create jobs were being hurt by the global downturn, Gordhan said, making it very difficult for the government to meet its goal of creating 5-million jobs by 2020.
‘More government, business cooperation needed’
He called for more coordination and cooperation among government, business and labour, and a crackdown on corruption, which robbed the country of funds that could be used for development.
He also expressed concern about an increasing number of unsecured loans being granted by South African banks. He called on consumers to be careful about spending and borrowing, but said his and other institutions had not yet determined it was time to ask the banks to decrease lending.
“There is no crisis in the banking system,” he said. “Let’s be absolutely clear about that.”
Despite his concerns, he said recent steps by international ratings agency to downgrade their outlooks for South Africa were unjustified.
The moves seemed “to be an unfortunate casting of European shadows on the South African scene,” he said.
Some had pointed with concern to plans to create a national health system and other policies meant to help South Africa country’s impoverished majority, Gordhan said. He said: “none of that will happen outside a framework of fiscal sustainability.”