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THE INTERVIEW

What’s keeping Finance Minister Godongwana up at night?

What’s keeping Finance Minister Godongwana up at night?
Illustrative image: Finance Minister Enoch Godongwana. (Photo: Shelley Christians / Rawpixel)

Much like the rest of the country, the energy crisis is one of the biggest things keeping the finance minister up at night - along with municipal debt and logistics problems.

In an exclusive interview with this journalist and Asset TV last week at the Government Employees’ Pension Fund thought leadership conference, Finance Minister Enoch Godongwana told us what’s keeping him up at night.

The answer was two things – municipal debt and the energy crisis. 

And the two are linked. By the end of August this year, municipalities owed Eskom a staggering R63-billion. The figure is alarming, particularly given that National Treasury announced a municipal debt relief programme worth R56-billion in May this year.

“The problem is we have municipal managers who are approving budgets that include expenses that exceed their income,” the minister said. 

On the topic of the energy crisis, he said it was a contributing factor and had been a constraint to economic growth for more than 15 years. 

“There is a correlation between electricity outages since 2008 and the poor economic performance of the South African economy,” he said.

The effect of rolling blackouts 

According to EskomSePush, we have had 5,860 hours – or 244 days – of rolling blackouts this year alone. 

A bulletin by Chris Loewald, head of the economic research department at the South African Reserve Bank, released in June this year states that South Africa’s domestic growth has been on a declining trend since it peaked at around 6% prior to the global financial crisis around 2008. 

Looking at GDP for 2022, various financial institutions came up with studies that reached different conclusions when it came to the effect of load shedding on GDP.

For example, Absa estimated that power cuts reduced real GDP growth by 1.3 percentage points in 2022. 

Intellidex estimated the impact of load shedding to be an average of R125-million to R250-million per day, cutting real GDP growth by 0.9 percentage points. 

FNB worked on the assumption that Stages 1 and 2 of load shedding are relatively “normal” and not problematic for most companies or sectors, with the conclusion that load shedding would shave off around 0.4-0.5 percentage points of 2022 growth.

Investec used Eskom’s value of energy expected to be lost per day for the different stages of load shedding and found that it could be expected to shave off at least 0.9 percentage points of 2022 GDP growth. 

Investec worked on the assumption that at least 60 to 80% of businesses have backup power (generators), resulting in a lower impact of between 0.2 and 0.4 percentage points. 

PwC estimated the impact of load shedding to be between 3.5% and 4.2% of GDP for 2022.

The logistics issue: road vs rail

“The second thing that has come back to haunt us is logistics,” Godongwana said. 

“The coal industry is set to retrench around 35,000 jobs, which has serious implications for revenue. We are set to lose around R25-billion a year in revenue,” he says.

Transport Minister Sindisiwe Chikunga says the current road/rail split stands at 87/13 percent. 

“This is not the equitable split required for an effective land surface transport system,” she says. 

Road freight transport has increased 48% in the last 10 years, with heavy goods vehicles making up as much as 34% of traffic on the N3.

According to Mesela Nhlapo, chief executive of the African Rail Industry Association, a lack of options in rail logistics service providers with an over-reliance on Transnet Freight Rail had proved costly for the mining sector. 

The Minerals Council estimates it lost R35-billion revenue in the 2022 financial year, and predicts the loss will be higher in the current financial year. 

Nhlapo says the introduction of third-party operators, coupled with investment in infrastructure and technology, would immediately see 60 million tonnes of 840 million tonnes of freight currently being moved by trucks, returning to rail. DM

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Comments - Please in order to comment.

  • Denise Smit says:

    The ANC started the non payment or getting free everything culture. The EFF is promising it to all its voters. How is the ANC/EFF going to go against what they encouraged their constituities to do. Denise Smit

  • Glyn Morgan says:

    The ONLY solution lies in getting rid of the ANC.

    Vote DA.

  • Confucious Says says:

    Reality! Reality is what keeps this man awake at night!

    • Mark Gory Gory says:

      Like all anc freeloaders, he sleeps soundly knowing that there is no consequence to his or any of his mates’ corruption or incompetence.
      Stolen funds safely stashed in Mauritius or somesuch space, and life is good.
      Tough luck to the poor. They’ve served their purpose.

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