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hat does the six year rule of president Jacob Zuma
amount to? This question has its very obvious
answers by his most vocal critics, which at times
feels like the entire electorate. Nkandla of course
is top of mind along with the growth in corruption,
which has affected almost each and every single
government department and even hallowed organs like the South
African Revenue Services.
It is all rather tragic, a sad comment on just how low public confi-
dence has grown in the political theatre that surrounds the ruling
party’s headquarters and in turn the Union Buildings.
What I find the biggest indictment of the incumbents rule has been
the inability of his government to think beyond immediate solutions
for a country that is begging for long-term structural reforms. (And
this isn’t another dig on age old gripe from the private sector over
labour laws, because I think people are still very fireable with some
paperwork.)
What has happened here is a ruling party fearful of its waning
support in what is fast becoming a more competitive landscape
both within and outside the party. Within the party, factions
emerge at almost every branch meeting and outside the party,
we’ve seen the emergence of the supposedly radical “Economic
Freedom Fighters” and a better organised Democratic Alliance
has only served to stoke tensions.
The outcome from which has seen the ruling party take its eye off the
needs of an ailing South African economy – like much of the global
economy. If we don’t adapt to this ever changing global economy,
where ideas are the currency, we’ll only fall further behind.
The big elephant in the room at the moment is energy and the state
of Eskom.
Just why the parastatal has become a drain on the national budget
– already under strain from falling commodity prices because of
China’s cooling appetite for resources – is because in the eight years
since its crisis, we are yet to have developed a long-term strategic
funding plan for the company. What we know is that even after the
build of Medupi and Kusile, the company has to still build additional
generating capacity, as some of its older stations will need to be
retired at some stage.
Just how that will be done is contingent on the company having
a revenue projection to take to potential funders in the financial
capitals of New York or London. What’s needed is a plan longer
than the three year tariff application that it puts before the energy
regulator, the National Energy Regulator of South Africa. How does
a bond investor even begin to look at funding Eskom off its own
balance sheet if the company doesn’t know exactly what type of
tariff it may get, especially as the process is influenced by political
considerations?
What Eskom can bring to a potential investor in its bonds, is a short-
term forecast of what type of tariffs it is likely to get. But of course,
this is all contingent on the popularity of the governing party and
when elections are scheduled. Let me be fair, it’s something many of
the world’s leading democracies unfortunately fall trap to.
And if energy wasn’t as big a threat to the competitiveness of
the South African economy, I’d perhaps say we can live with this
modern day drawback of re-elective politics. But a country that
needs to increase the size of its economy to at least begin to
address unemployment – for no matter what you may hear out
there is really at crisis proportions – we can’t afford the indulgence.
In order to fund its current build and the future expansion, Eskom
needs to be able to put a revenue projection plan which as painful
as it may be to all of us, will at least ensure that off its own balance
sheet we are able to boost generating capacity.
If not, we’ll just continue papering over the cracks in the system, to
the detriment of our national budget.
Our politics...
RON DERBY,
deputy editor,
Financial Mail
POLITICAL
analysis
RELEVANT
“
What has happened
here is a ruling party fear-
ful of its waning support
in what is fast becoming
a more competitive land-
scape both within and
outside the party.
“