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  • Thando Ngozo

World Bank Group Country Partnership Framework (CPF) with South Africa – A Critical Review

Updated: Aug 21, 2023

South Africa has a long-standing relationship with numerous International Finance Institutions both as lenders, market discipline enforcers and capacity development partners. The World Bank Group (WBG) is one such institution that has formal working arrangements with the government of South Africa through the Country Partnership Framework (CPF). CPF is a management tool through which the World Bank assesses and identifies the Bank's support programs to member countries. The framework is drawn for four years and comprises a diagnostic analysis of socio-economic, macro-economic and governance challenges affecting South Africa and intervening support programs.

The World Bank-South Africa country partnership framework spans between 2022 and 2026 and rightly identifies the dire economic straits impinging growth and development. These challenges are not new, as highlighted in numerous other nationally and internationally reports, most notable, the NDP, Economic Reconstruction and Recovery Plan and the IMF's annual Article IV. Unfavourable growth patterns in which the labour-intensive manufacturing and primary sectors are increasingly waning. Deteriorating fiscal balances accentuated by rising debt and current account deficit. Disappointingly low investments exacerbated by low savings rate and deteriorating return to capital are but a few factors these reports laments, including the CPF report.

Based on the diagnostic analysis and guided by the CPF overarching goals of addressing poverty, unemployment and inequality, the World Bank, in conjunction with the government of South Africa, has designed activities to address socio-economic constraints and promote shared prosperity as per the table below.

CPF selected binding constraints and WB intervention program

As can be seen from the table above, CPF interventions do not necessarily comprise actual hands-on programs but rather credit extension to state and non-state organisations as well as advocacy and advisory services (ASAs) – channelled through the National Treasury. For instance, with respect to promoting investment, the report state as follows: "The WBG will, through Analytical and Advisory Services programs, provide support to government s policy development efforts to enhance institutional and regulatory frameworks for investment retention and generation. This will include, where possible and where there is clear demand, support to (i) address economy-wide policy uncertainty and sector level investment barriers; (ii) boost investor confidence by strengthening investment policies, adopting and deploying active retention tools for investor tracking, aftercare and grievance management; and (iii) upgrade competencies for investment promotion including strengthening capacity and improving coordination and coherence between national and subnational investment promotion efforts". This type of service is synonymous with the functions carried out by the Department of Trade and Industry. Therefore, such interventions ought to be led by the government or augment programs already implemented by the government to minimise duplications and inter-departmental tensions.

Similar approaches are evident regarding lending where the report states that the International Finance Corporation (Part of the World Bank Group) provided immediate Covid-19 response "to finance the rollout of modular mobile Covid-19 testing and treatment infrastructure across South Africa in partnership with a leading logistics company. Existing clients in the real and financial sectors were supported through its global US$8 billion Fast Track Facility. This support included, among others, a US$660 million loan to a municipality to deal with Covid-19 related challenges, US$185 million for COVID-19 relief to one of the four large commercial banks, another US$10m working capital facility to a smaller bank and an investment of US$600 million in bond issuance by a municipality during a period of market disruption caused by the onset of Covid-19". Again, these activities are implemented through the ASA and do not necessarily involve hands-on support.

The Bank may create demand for advisory services through the extension of credit to the public and private sectors. Credit linked technical assistance requires greater caution to minimise the lender's agenda from trumping government priorities, particularly in granting credit for lender-imposed reforms. This is especially true for programs such as the climate-resilient adaptation and renewable energy transition, where municipalities may be rushed to adopt programs for which they are not ready to implement. For instance, under the Climate Resistance Pillar of the CPF, the World Bank seeks to assist South Africa's government in integrating climate risk into macro-fiscal planning and designing carbon budgets.

Technical assistance is understandably part of the normal lender-borrower relationship, but the assistance should be targeted with the needs of the recipient organisation in mind. In South Africa, landed funds are traditionally deposited into the national revenue pool and allocated through a process of expenditure prioritisation. In the absence of loan finance earmarking, CPF ASA programs should be anchored at implementing agencies (rather than the National Treasury) and linked directly to the relevant departmental policy development processes – to ensure better adaptation and internalisation of the advisory services.

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