South Africa has been on a downward spiral for more than 10 years. This is demonstrated by the country’s dismal economic growth rate, rising unemployment, increasing inequality, constant downgrades of the country’s credit rating and now again, the risk of the national power grid collapsing. What is becoming clearer by the day is that the African National Congress and President Cyril Ramaphosa have put us in this situation.

Moody’s is scheduled to review South Africa’s credit rating on 29 March 2019. Initially the sentiment was that South Africa might be given yet another chance. However, the probability is looking less positive, as it becomes clearer that Ramaphosa’s ANC has no intention to bring about real change, including fixing Eskom.

The country has once again been plunged into darkness as a result of ANC mismanagement and corruption at Eskom. This is not a new issue as the country has experienced this in the past, Ramaphosa was also tasked to oversee a turnaround strategy at Eskom in 2014, with no success. The issue then becomes that if Ramaphosa oversaw the turnaround strategy as far back as 2014 and has been the Leader of Government Business in his role as former President Zuma’s deputy for five years, how can anyone trust him to resolve this now? South Africa and the rest of the world have been watching “this space” for more than six years.

At the most recent update (19 March 2019) on Eskom and the rolling blackouts, the Minister of Public Enterprises Pravin Gordhan basically told South Africans to prepare for worst and that they did not have a plan to resolve a crisis of their own making. When Gordhan was appointed, some had hope that he would bring drastic changes to state-owned enterprises. However, what we have seen is his old and overplayed “new boards and bailouts” strategy, which is no more than a façade of action being taken. In fact, Gordhan has already worsened the situation by stopping some of the processes that would have made a positive impact in order to keep the ANC, SACP and Cosatu alliance intact.

In response to the 2019 Budget, Moody’s took a “wait and see” approach based on their scepticism of whether Eskom would really be unbundled. At this stage, it seems that they were right to wait and observe as a U-turn on this announcement seems imminent, given Ramaphosa and the ANC’s track record. On top of this, it is becoming clearer that the 2019 Budget was not credible as various expenditures were kept off the books; a Steinhoff move if you will.

This situation, created by the ANC, and very much continued by Ramaphosa at the helm, increases the probability of Moody’s downgrading South Africa to junk status. A downgrade by Moody’s will mean that South Africa is ranked as “junk status” by all three of the major credit rating agencies. Due to legal requirements, institutional investors such as pension funds will not be eligible to invest in South Africa, as the risk would be too high.

Put differently, would you invest your pension in VBS? It is estimated that about R100-billion in investment would flow out of South Africa in the case of a Moody’s downgrade. This will weaken the economy further and unemployment will inevitably increase as well.

South Africa deserves better than this. In October 2018 the Democratic Alliance had already proposed a plausible solution in the form of our ISMO Bill, or known by some as the “Cheaper Electricity Bill”. The bill sets out that Eskom as the biggest monopoly in the country should be broken up in two parts: A generation part and a distribution and transmission part.

The transmission and distribution sections will continue to fall under the control of the state-owned entity; however, it would be illogical to have the same approach to generation. The bill will introduce competition into generation by bringing the private sector on board. This will decrease energy prices, increase the efficiency of public money being spent and make energy supply more reliable.

Before Ramaphosa projected strong U-turn signs, he said that Eskom would be unbundled. However, this plan was an inferior spin-off of the DA’s ISMO bill. The proposal would simply have broken Eskom up into three SOEs as opposed to one. This means that this plan would have increased overheads and created more inefficient boards.

Up until this point, the DA is the only party that has shown that it is capable of efficient risk and crisis management with a viable solution to solving the mess created by the ANC at Eskom. DM

Natasha Mazzone is the DA’s Shadow Minister for Public Enterprises.