South Africa


Godongwana attempts to heal government’s self-inflicted wounds, and I suffer self-imposed coffee withdrawal

Godongwana attempts to heal government’s self-inflicted wounds, and I suffer self-imposed coffee withdrawal
Finance Minister Enoch Godongwana delivers the Budget Speech on 22 February 2023 in Cape Town, South Africa. (Photo: GCIS)

The presentation of a national Budget is often a slightly strange affair; it is the prose of governance after what is supposed to be the poetry of the State of the Nation Address. Going into the speech, it was clear that the government’s credibility was on the line, and, as the trite saying goes, hard decisions would have to be made.

It was a surprise to hear at least one economist suggest that on Wednesday, Finance Minister Enoch Godongwana had announced the “biggest reforms since 1994”. Not everyone agreed.

I was seated outside the Cape Town City Hall. I am also off coffee. Not drinking it. But writing about it. It was a hard realisation, upon rereading previous entries in my Reporter’s Notebook (for entirely egotistical reasons) that virtually every piece submitted over the years, from rainy Nasrec to sunny Switzerland, has started with coffee, front and centre.

It’s time to quit. I expect headaches, bad ones.

Before Godongwana rose to the podium, there was a strange question to ask the economic commentariat. It was this: 

“Is this the hardest position a finance minister has been in since 1994 … and didn’t I ask the same question last year?”

It was a nod to the times, the Stage 6 load shedding, the awful food price inflation, and the fact that for most people, their lived experiences have deteriorated markedly in the last five years.

The answer, of course, is “yes”. These are very tough times.

There is another funny tradition about the Budget. It’s always hot on the day, no matter what. Being in Cape Town, it was fairly humid too. Not the kind of weather you want to be wearing TV make-up in, even though the people who apply it are the best (and often the funniest) in the business. After lots of warm-up chats, discussion, and not a little gossip, it was time to shut up and listen.

Or, more accurately, read the speech, which dropped on a number of WhatsApp groups, all at the same time.

While that was the right thing to do, it was easier, and much quicker, to read what Ray Mahlaka had learnt during the lockup, and then to read it for myself:

Government comes to Eskom’s rescue by taking over R254bn of its debt 

Immediately, the three main points were clear: 

  • There is a massive incentive for businesses to invest in solar rooftop power (a tax rebate of 125%);
  • There is some help for homeowners to do the same thing (15%, up to R15,000, of the cost of the solar panels, which are the cheapest part of the installation); and
  • The first solid proposal to deal with the municipal debt owed to Eskom.

Later, the head of research at RMB, Isaah Mhlanga, suggested on Newzroom Afrika that, in fact, this was the “biggest reform” since 1994. His point was that, up until now, the government has always treated electricity as something it provides for people. Now people will provide it for themselves.

The beginning of a new network

He is right in many ways. This is a crucial change. It is the beginning of the end of the network that ties us all together. Or, the beginning of a new network, in which the government is able to manage the distribution of power generated in different ways to ensure that the rich still subsidise the poor. 

Of course, the real benefit is that government does not have to invest in all the new power-generating capacity. Businesses and homeowners will invest, and in the process relieve demand on the grid.

But the real reason this will work is that the government will not actually have to do anything, there is nothing to be implemented, no money to be misspent, nothing that has to be bought, no project that can be interfered with, no opportunities for patronage or anything else.

Nothing to steal, waste or otherwise mess up.

In short, this will work because it is our government getting out of the way, allowing people who can to do it for themselves.

And, as Professor Mark Swilling noted in December, this is part of the “disorderly transition” as the private sector literally takes it over.

Dark, Dumb and Dangerous: Inside South Africa’s perfect (electrical) storm

There are many pros to this. It will work, there will be more power generated, there will be less load shedding, and everyone will benefit as a result.

But there are some cons. It may lead to the poor being left in the dark, and municipalities that will no longer be able to top up their budgets through the on-selling of electricity. The transitions can be badly mismanaged, with unforeseen consequences, as we have seen the government screw up so many times before.

But, at least, it is something to start with.

Then there is the proposal by Godongwana to manage the debt owed by municipalities to Eskom — this figure stood at R56.3-billion in December 2022.

His suggestion is that there will be “incentivised relief” to municipalities whose debt is unaffordable. This will include conditions where councils will have to install prepaid meters. This makes perfect sense, of course.

Except that it has been tried before. And sometimes it has ended in violence, where communities have protested against the installation of prepaid meters.

All of this led to a fascinating conversation on Newzroom Afrika involving the chair of the Financial and Fiscal Commission, Dr Nombeko Mbava, and Elroy Paulus from the Budget Justice Coalition.

Mbava started with a strong point, that if Eskom is not able to implement its Nersa-mandated 18% tariff increase on schedule, then it will simply not be able to manage its finances, and will not be able to produce enough electricity or invest in more generation and transmission capacity.

She also made the point, also strongly, that we cannot run up debts and ask our children to pay them.

Paulus had a more personal point of view, suggesting he could not believe how small the increase in social grants had been. He had just come from standing in a queue for a UIF payment for nine hours, and asked if the government had any idea of how tough life was for so many people in our country.

In a way, this is the real tension in our society, the real issue we have to face. We have debt, loads of it, now. We have costs we have to pay, now. We have people suffering, now. And, if we don’t pay our debts, now … who will pay them?

For the moment, Godongwana is on the side of those who believe we must pay it now.

This is really an argument about generational inequality. We can help those who are poor now, at the cost of their children, or we can hurt those who are poor now and hope their children don’t suffer.

Perhaps. Of course, it’s not nearly as simple as that; asking our children to suffer involves the payment of interest, which will result in much more debt.

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A chat with ‘Silence’

The guests kept coming to the programme: the minister of communications and digital technologies, Khumbudzo Ntshavheni, came in for a chat; up until the moment I wrote this, I had no idea that she had also been given the name “Silence”.

She was happy to answer questions about the digital migration, and how TV is changing — she is very confident that terrestrial analogue TV signals will be switched off soon, so releasing spectrum for more 4G and 5G data signals.

One of the stranger stories of the last few weeks has been the failure of President Cyril Ramaphosa to formally appoint a new board to the SABC. Ntshavheni says that he is applying his mind and has to analyse their CVs; he cannot just appoint, he does actually have to act.

But it appears that legal action on this may soon follow, that organisations like Media Monitoring Africa or the Save Our SABC coalition may go to court on this issue.

Mr President, please follow your mandate and finally appoint the SABC board

While watching and listening to the aftermath of Godongwana’s speech, with not a (non-fiscal) cloud over the glorious Cape Town skyline, I was struck by something.

Virtually all of the opposition parties were competing to show how angry they were with his speech.

Julius Malema said it was not going to improve anything, and Cope’s Willie Madisha said it was the worst Budget ever; there appeared to be a competition to shout it down. 

This is a far cry from how things used to be. There was a time, perhaps 10 years ago, when Budgets were generally welcomed, and the Budget’s prose was deemed better than the Sona’s poetry. It was part of a democratic consensus, in which people representing different constituencies still trusted each other.

This is no more. And isn’t that a massive indication of the times we are living in? We are more apart than ever.

Those who can, will be given space by the government to generate their own power. We don’t know whether to enforce more poverty on the youth of today and hope that the youth of tomorrow will be in a better place, and those who receive a child support grant get another R30 a month.

Life is getting worse.

And I can’t even write about coffee any more. DM


Comments - Please in order to comment.

  • Johan Buys says:

    The minister is showing some strength with terms and conditions on the Eskom debt. Stopping all new generation capex at Eskom is also a good move. They overspend 300% on everything and then the project delivers 60% of specification…. What do we do when Eskom just (spends) the money on salaries and operating expenses? What is unclear is how the municipal debt will be dealt with? Treasury should immediately start paying Eskom directly as a deduction from the local government transfers.

  • Jon Quirk says:

    Does President Shilly-Shally, avoid, delay, prevaricate, do-nothing, really expect us to believe his spokesman when he says that it is insulting to him when, Mr du Ruyter says that not only are there crime syndicates operating off and out of the carcass of Eskom – which any and all sentient followers of SA current affairs already knew, but that they are protecting by senior ANC big-wigs, which likewise we already knew or at least firmly suspected?

    So President do-nothing is going to still pretend he is not aware, and again is going to do nothing?

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