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South Africa. 2020: The year of Reckoning.

The year 2020 is going to tell us a lot about the long-term future of our country. Are we going to pull ourselves out of the mud of corruption, incompetence and ignorance, and start to glimpse the ‘better life for all’ that we have been promised since 1994, or will we instead continue dithering around, putting personal and party interests before public needs, and simply dig ourselves deeper
into the hole?

The main indicator will be how the governing party deals with Electricity Supply Commission (Eskom) and the other ailing state-owned enterprises (SOEs). Now that we have begun to tackle the political and governance disasters of the Zuma years (and the fact that we have done this is itself a massively encouraging factor), we find ourselves facing economic meltdown. It would be bad enough if we only had to deal with unemployment of over 30%; or with a national debt that will soon reach 70% of GDP; or with falling tax revenues; or with factors beyond our control, such as drought and climate change.

 Any one of these would test the abilities of a government with a good track record when it comes to economic policy; and our government has anything but a good track record. Instead, we must confront an economic challenge greater and more immediate than all these—Eskom has been mismanaged to the point where it has a debt of over R450 billion (30 billion dollars), and not only can it not pay back this debt, it cannot even pay the interest on it.
If that sounds like too much money to think about, consider it this way: Eskom is owned by the state, that is, you and me.
That R450 billion is our debt, money that we owe to banks and institutions here and overseas. Do you have a family of five people? You owe R40 000 (US$ 2, 668). Are you single? You owe R8 000 (US$ 533.60) . No one else is going to pay it. How will you pay it? Through taxes mainly, as the government continues to hand over billions of Rands to keep Eskom going but also through higher electricity prices, since this is the only product that Eskom can sell.

Unfortunately, we are all doing our best to save electricity, and on top of that regular load-shedding further reduces the amount of product that Eskom sells, leading to more growth in its debt, and so the vicious cycle continues.
If you like, you can add into this unhappy mix the problems affecting South African Airways (it owes R20 billion which it cannot pay back, and loses millions more every day); the Passenger Rail Agency, PRASA (which is so badly run that it now transports only a fraction of the number of people that used the trains 20 years ago), and various other SOEs. Ironically, it is only the size of the catastrophe at Eskom that makes the problems of these other parastatals look manageable.
I referred earlier to how the governing party, not the government, deals with the ailing SOEs.

One of the root causes of our governance and economic problems is the fact that the ANC’s massive electoral dominance, allied with its mythic status as the party of liberation, has erased the distinction between the two, the party and the government. The ultimate centre of governance in South Africa is the ANC’s National Executive Committee, based at Luthuli House, Johannesburg, rather than Cyril Ramaphosa’s cabinet, based at the Union Buildings in Tshwane. And so, when important decisions have to be made, the first question is not “what is in the best interests of the country,” but “what is in the best interests of the ANC.” Sometimes the question is further narrowed to ‘what is in the best interests of my faction of the ANC’, and sometimes it is just assumed that the interests of the country and the interests of the ANC are the same thing. Eskom provides us with clear examples of the problem. Over the years, it has grown its workforce to the point where it now employs nearly 50% more people than it did fifteen years ago, while producing no more electricity than it did then.

A large part of its debt problem stems from its huge wage bill, but any talk of retrenchments is immediately ruled out by the ANC; its trade union ally, COSATU, won’t accept it, and the ANC does not want to pay the political price for putting people ‘on the street’. So the debt crisis at Eskom continues. Academic and technical experts concur that one way of helping Eskom out of its current mess is by bringing in private sector finance, skills and resources; in other words, by partial privatisation—but that is a dirty word in the ANC, which still pretends that it is a broadly socialist movement.

And its alliance partners, COSATU and the Communist Party, would sooner see the lights go out permanently than admit that their statist ideology is a pipe dream. So the skills shortages and the incompetence at Eskom continue. (To be fair, a new CEO from the private sector has been appointed, but whether he will be allowed to cut staff and to introduce a degree of privatisation is far from clear.) ANC factionalism plays its part too.

The secretary-general, Ace Magashule, and the remaining Zuma-ites in the NEC, many of whom benefited from the dodgy dealings of the past, and who stand to lose out significantly if President Ramaphosa’s clean-up continues, will do all they can to frustrate him, including taking ‘the side of the workers’ in debates around much- needed restructuring and cost reductions at SOEs. The Minister of Energy and Mineral Resources, Gwede Mantashe, drags his feet when he should be moving urgently to allow private power producers to add their electricity to the national grid; and still maintains that coal, rather than renewables, must be the long-term mainstay of electricity generation.

The crooked coal supply contracts entered into between Eskom and various crooked companies during the Zuma/Gupta era (which also account for a large slice of the huge debt) don’t seem to bother him at all. As in the days when he was ANC secretary-general, Mr Mantashe can’t seem to pick a side in the factional and patronage battles.

By the end of this year, if we have not seen decisive measures to change direction at Eskom and at some other SOEs, the long-term prospects for the country will be very bad indeed. Fortunately, here at the beginning of the year there are some positive signs: the appointment of Mr De Ruyter at Eskom was a brave step politically; so was the placing of SAA into business rescue. The arrest of various executives implicated in corruption at SOEs is also important, not only in itself, but also because it signals that the prosecution authority is finding its focus. Let us hope for more of the same as the year rolls along.

Mike Pothier
Programme Manager,
Southern African Catholic Bishops’ Conference (SACBC)
Parliamentary Liaison Office

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