JACOB Zuma has finally said what his predecessor, Thabo Mbeki ought to have said a long time ago: You can’t blame the lack of services and facilities on apartheid some 16 years into democracy.
In an under-reported statement to his director generals on Friday, Zuma said: “After two decades we will not be able to make an excuse if we do not deliver faster change in the lives of our people.”
He went on to say: “We will not be able to blame apartheid if villages still have no water, no electricity, no roads. We will not be able to blame anyone else if children still study under trees, if houses and schools are falling apart.”
I happen to believe that apartheid must still shoulder the blame for creating a society so vastly unequal that even the proper use of resources over the last 16 years would not have levelled the playing field.
But that is not the point. The point is to take responsibility and that is what Zuma has done. Government must stand up and account for failures in delivery. And, he also said, strong action must be taken against those who undermine the state’s ability to deliver with inefficiency and corruption.
I knew that would get your attention. But that’s exactly what the National Electricity Regulator has just approved by agreeing to a 25% increase in power charges.
This means that for no new services we will be coughing up hundreds of rands more to the parastatal Eskom.
I don’t buy into the idea that there were no alternatives.
The questions that should have been asked before such a raise were:
1. Is there sufficient competition in the production and distribution of electricity to make the pricing competitive. Answer: No.
2. Are there savings that can be made by making Eskom more efficient? Answer: Yes.
3. Does the negative effect on growth and inflation justify an increase? Answer: No.
But this is not how government regulators conduct their business. They indulge these fat parastatals, protect them against competition and make us pay ever higher bills.
The comments of Nersa chair, Cecilia Khuzwayo did not inspire confidence.
She said: “It is clear that the economy is now in recession mode”. This is simply not true. If she had done her homework, she would know that the economy grew by 3,2% in the fourth quarter signalling that the recession was very much over.
It suggests that Khuzwayo doesn’t know what’s going on in the macro economy which is, frankly, pathetic for someone in her position.
Her remark that “Electricity is the democracy of the country” is weird. Why is she then imposing a tax on democracy? Does she think its a bad thing?
YOU are situated on the Southern tip of Africa, far away from the world’s markets to the east, north and west. You have a highly unionised labour force and inflexible labour laws that make hiring a very large commitment. Your wages are way in excess of those of your competitors. Your country is one of the most dangerous in the world with raging crime statistics. Your desperately need foreign investment.
Ranged against all these obstacles (many of which could be eliminated by effective government) you have only four competitive advantages to the industrial investor.
The first is a relatively stable macro-economic and political environment.
The second advantage is that you are the gateway to Africa when it comes to financial services, political influence and sophisticated infrastructure. The third is that you are a resource producing country which can offer a range of raw materials without massive transport costs to plant. The fourth is that your electricity is the cheapest in the world.
What government is supposed to do is to diminish our disadvantages and enhance our competitive advantages.
There is nothing that can be done about the accident of geography, but there is much that can be done to change the rest of our investment environment by adopting the right policies and playing to our strengths.
We can make our labour market more competitive by reviewing our archaic labour laws. We can fight crime by improving policing and bolstering our criminal justice system.
When it comes to our advantages, we can do a lot more. We can integrate much better with Africa, welcoming African skills onto our shores by getting rid of our ridiculous immigration laws.
We should be embracing Africans instead of treating them with suspicion and we should be turning South Africa into a country that is proudly and assertively African.
We can build on the competitive advantage our financial services sector enjoys on the continent and clear the way for our banks to expand their networks in Africa by turning this into an industrial development priority.
This would mean actively developing skills in this area and turning our priorities from defensive ones aimed to keeping alive industries in sectors where we cannot compete to an aggressive one that seeks to drive home our strengths.
Another strength we should be driving home is our competitive advantage when it comes to cheap energy.
That is why massive investments have been made by the likes of BHP Billiton in smelters on our shores despite the fact that they are far from the markets where the finished product will be sold.
But what has government actually done to diminish our weaknesses and build our competitive strengths?
With the exception of crime, where we are at least blustering in the right direction, the answer appears to be “very little, indeed”.
There is a danger that not only are we doing very little to attract investment, but that the very structure of our politics mitigates against us prioritising this.
We have a political elite that has, despite its many utterances to the contrary, closed the door on job creation.
Dependent on “allies” to the left to keep its political power, the elite has begun concentrating its energy on the futile task of preserving uncompetitive jobs instead of creating new ones where we can compete.
Add to this the fact that this alliance makes it impossible to review the labour laws which reduce the flexibility of the labour market and the possibility of creating jobs is further diminished.
Ideological choices which harken back to statism are being made.
Instead of embracing the skills, talent and the markets of Africa, we appear quietly hostile to Africans.
Our leaders travel the continent meeting with heads of state and attending summits, but back home they do precious little to make South Africa a welcoming place for Africans.
Low-level xenophobia is allowed to continue with very little active intervention. Has anyone been prosecuted for the shocking slaughter of hundreds of foreigners in the xenophobic attacks? Apparently this is not a law enforcement priority.
Which brings us to the questions of electricity.
Last week the respected economist Mike Shussler pointed out that we are about to become among the world’s most expensive producers of electricity.
We have already lost precious foreign investment in a smelter in the Eastern Cape because of our high electricity prices.
The three consecutive increases of 45% proposed for electricity will sound the death knell for heavy industrial investment and could cause those already here, such as car manufacturers to reconsider.
We had better wake up to the reality of competing in a ruthless world. We don’t need faux Ubuntu, we need the competitive mindset of Shaka Zulu.
BOBBY Godsell, the former free market ideologue, has finally spat it out. Eskom wants to hike electricity costs by 45% a year for three years. Translation: Your monthly electricity bill will rise from around R800 to around R3000.
Why does he want to do this? Because his organisation insists on controlling the producting and distribution of electricity as a state monopoly without the efficiencies that would be introduced by private sector competition.
Yes, Godsell has made noises about wanting the private sector involved in electricity production and distribution and has weakly remarked that alternative power sources must be explored.
The truth is that Eskom has undermined, ignored and shelved several offers of co-generation from the private sector over the last year. Eskom is the mother of all uncompetitive parastatals. While the world has allowed the private sector into energy production and distribution, Eskom has held on with white knuckles.
Because Bobby like coal, truckloads of it, trains full of it, delivered day and night to power stations. Why? Well, he is
the former chairman of Anglo Coal (tks, Paul Theron) a former Anglo heavyweight and AngloCoal is a major Eskom supplier. If we pay more for electricity, it will pave the way for increases in the price of coal and that means more money for Bobby’s friends.
Does Godsell have a direct financial interest in this? I don’t know. But if he is not being paid by the coal companies, he should sue them.
Brendan Boyle reports from Parliament that the price of electricity “would have to rise threefold”. He quotes Bobby Godsell, Eskom’s chairman as saying that South Africans need to pay around 8 or 9 US cents a kwh compared to the 3 US cents they are paying now.
“For the company to return to full health, Eskom needs to fully recover operating costs. That will require a significantly higher tariff,” Godsell said.
Godsell wants a “national debate” on how to get to the higher pricing level.
But the question remains: Is the production and distribution of electricity in South Africa being done efficiently by this lumbering giant of a parastatal? Where is the competition and where are the privatised regional distributors that were once spoken of?
Godsell should know better. He must face up to the reality that he is the chairman of an uncompetitive state monopoly that needs to feel the winds of private sector competition. Or has he forgotten all that private sector nonsense now that he is trying to carve out a political legacy?
This hot off Sapa:
27 July 2009
ANC HARD AT WORK DESPITE POWER FAILURE AND STRIKE THREAT
Undaunted by power failure which today (27 July 2009) plunged
most floors of Chief Albert Luthuli House – African National
Congress headquarters into darkness, and a threat of Johannesburg
being brought to a standstill by striking municipal workers, the
work of the ANC has not come to a stop. Read More…
A TITANIC battle is taking place at the National Electricity Regulator over Eskom’s proposed 34% tariff hike.
The utility is arguing that it needs the money for a massive investment in infrastructure to prevent a repeat of the serial blackouts of just over a year ago.
But there are many voices arguing against the hike — the size of it and the fact that it is being delivered in one gigantic hit instead of being spread over several years.
Among the most considered responses has been that of Cosatu, whose industrial policy co-ordinator, Jonas Mosia pointed out: “Electricity production by Eskom, consumption and distribution to provinces declined by 7.2 percent, 5.5 percent and 7.4 percent respectively for the first quarter of 2009, compared to the first quarter of 2008.”
The contraction in electricity demand appears to have passed Eskom by as it continues to base its consumption expectations on the height of the pre-recession boom.
Mosia makes the point that “over 208,000 jobs have been lost due to the financial crisis. Poor households would bear the burden of high electricity tariffs.”
The regulator needs to look carefully at Eskom’s demand and its impact on households — and therefore on the economy — before it rubber-stamps the request.
Questions need to be asked about Eskom’s cost structure, the environmental untenability of its coal-based expansion programme.
Urgent infrastructure essential to delivering electricity must be prioritised.
But the imposition of what amounts to a massive tax on South African businesses and the public, who struggling to survive the recession, would set back efforts to revive the economy. It’s too much too soon.
NOW we know. The National Energy Regulator of South Africa (Nersa) has said it: The blackouts which hit homes and businesses around the country earlier this year cost the economy an estimated R50 billion.
But this is the tip of the iceberg.
It does not factor in the untold damage done to South Africa as an investment destination.
Eskom at one point in the January crisis actually called on industry not to plan any electricity-dependent expansion until 2013.
What price can be put on the loss of future investment as the brakes were put on future investment?
How many potential investors around the world put a pencil through plans to build plant in South Africa?
And what price can be placed on the loss of goodwill which brand South Africa suffered?
And, it does not factor in the cost in highly skilled people for whom the blackouts were the final impetus to leave South Africa for better organised countries.
Said Nersa CEO, Smunda Mokoena: “The supply shortage caught South Africa by surprise.”
While Eskom had responded well to the power supply shortage at the end of 2007, the regulator was not made aware of the “dwindling coal stocks leading to the virtual blackout in January”.
Nersa has identified that it is inappropriate that South Africa does not have an independent procurement agency to ensure that power is obtained to augment Eskom’s capacity.
“We are very skeptical that current procurement is being done by Eskom, not by government,” said Mokoena.
What is missing from the Nersa report is a demand that someone needs to carry the can for this biggest of all stuff-ups in post 1994 South Africa.
Until the powerful are made to fall on their swords, the culture of mediocre indifference in the highest offices will continue to flourish.
ESKOM has been load-shedding again. This time, it seems that the electricity provider was taken by surprise when the weather turned cold.
This phenomenon, known to most as winter, apparently occurs every year at this time. So it is baffling that there is no-one at Eskom who wondered aloud whether or not people would be switching on their heaters.
You know, to keep warm. Like they have done for time immemorial.
Apparently not. Apparently the cold weather surprise completely broadsided the technicians, engineers, scientists, planners and managers.
Perhaps they all arrived at work in short pants and slip-slops only to find their shins assailed by a unexpected chill.
In fairness, Eskom has also found itself having to repair power facilities as the cold weather arrived.
Apparently doing such maintenance during the last days of autumn when there was no load-shedding, was not considered for some reason.
The fact is that this corporation’s planning is seriously deficient.
The public is outraged and has expressed its displeasure, but this has had no effect.
The reason is simple: The bosses of Eskom have not suffered one jot since this bungling started.
They have not been fired, reprimanded, talked to or criticised by the state, which is their only shareholder.
This failure to punish failure has, by logical extension, made such failure an acceptable standard of service in the eyes of the sole shareholder.
So what have Eskom’s bosses done? They have continued to bungle.
And what has government done? The minister of public enterprises, Alec Erwin wants MORE Eskoms to kick-start growth in South Africa. He’s kidding, right?