Defend Truth


Hello load-shedding, goodbye economic growth


Xolisa Phillip has had quite an adventure as a journalist in the roles of subeditor, news editor, columnist and commentator. She pretends to be Olivia Pope during the day, while still maintaining a presence in journalism – a passion project she cannot shake away. Journalism keeps finding Phillip no matter where she is and somewhat manages to hold its own space no matter where she is professionally.

The South African government has not learnt from Eskom’s 2008 power supply crisis. As such, the country can forget about getting out of its current prolonged low-growth trap. Red lights are flashing at Eskom, but whose heads will roll? Will there be consequences?

What happens in a state where a culture of zero consequences becomes entrenched? You get a political class and an elite that is far removed from the realities faced by an electorate.

You get contradictory messaging and a deep disdain about the plight of ordinary citizens who do not have the means to escape an increasingly unforgiving system. You get a lack of action and a rise in political impunity. In short, sloganeering and a jingoistic posture replace meaningful action.

You get an Eskom that is unable and unwilling to become unstuck from a merry-go-round of its structural, systemic and governance failures. The chickens have, indeed, come home to roost and to make a mockery of what is currently unfolding before our eyes.

It has been more than 10 years since the power utility first encountered its grid and power supply problems. Yet, here we are, again, experiencing load shedding. The power crisis of the era circa 2008 was underpinned by growing electricity demand and an economy expanding at an average annual rate of 5%.

But that was happening against the backdrop of a lack of investment in the grid which manifested in zero new generation capacity. As such, demand outstripped supply by a mile. The upside is that more South Africans were experiencing the fruits of democracy in the form of electricity. On the downside, our politicians failed to plan adequately for this eventuality.

The energy crisis of 2008 and beyond had a devastating effect on GDP and industry and undermined some of the country’s core economic goals. It also put a damper on future investments because South Africa could not guarantee a steady supply of electricity. In the world of macro-economics, confidence can make the difference between below 1% annual growth or scaling the heights of double-digit economic growth.

The lack of confidence in an economy can lay waste to even the most eloquent and sophisticated growth plans because no one trusts that the system works. The consequences of a crisis of confidence are felt immediately, in the medium term and in the long term.

One of the assessments of the 2008 electricity supply debacle is that intensive users who had the scope to expand their manufacturing base could not do so. In other words, the country’s shaky energy security environment eroded investment into the economy.

That could not have happened at a worse time.

Globally, the world was experiencing an economic meltdown precipitated by the US sub-prime mortgage crisis. As a result, the global economy was plunged into recession. Locally, South Africa was the victim of its own poor planning, made worse by Eskom’s failure to meet demand.

Fast forward to 11 years later, the global economy has staged a remarkable recovery and is projected to grow 3.9% in 2019. South Africa will be lucky if it even reaches 1% in 2019.

In fact, the country will not even touch 1% of economic growth in 2019, according to the International Monetary Fund’s World Economic Outlook report released this week. It is likely to post 0.7% growth in 2019.

Eskom is intertwined with the country’s growth trajectory.

The power utility’s performance peaks and troughs correlate with weakened economic performance. It is no exaggeration when the likes of Moody’s Investors Service, S&P Global Ratings and Fitch Ratings characterise Eskom as the biggest systemic risk confronting the South African government, both operationally and fiscally.

President Cyril Ramaphosa gave a rousing inaugural state of the nation address in February 2018. In that speech, Ramaphosa vowed his government would “… seek to reindustrialise on a scale and at a pace that draws millions of job seekers into the economy”.

We are going to promote greater investment in key manufacturing sectors through the strategic use of incentives and a number of other measures that government has at its disposal,” he told the nation.

However, the promise of a new dawn is unravelling, with Eskom as the main source of its undoing. A dysfunctional Eskom is quickly rendering the president’s expressed ambitions and goals meaningless because there is no energy security.

The travesty is, no heads will roll. In the absence of such, we will continue to suffer under a political climate and culture that espouses zero consequences. BM


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