South Africa’s Economic Crisis
We don’t have the energy for this anymore!
It’s somewhat inconceivable and, depending on your point of view, a little bit humorous that South Africans can view the expression “to not have energy for something” in a completely different “light” to those outside our borders. But of course, there’s nothing funny about the devastating financial consequences of South Africa’s energy crisis, nor the impact on our quality of life.
Had it been an isolated incident with no other political or economic woes to fret over, then this may have been a crisis the South African populace, investors and even tourists may forgive, but we are facing an amalgamation of crises which have far-reaching consequences. These compound crises have created a collective snowball which citizens and resident of the country seem incapable of averting or stalling.
Even those countrymen and women who have thus far remained optimistic are slowly but surely swapping their rose-tinted glasses for a spectacles which allow them to observe this spectacle in a more reproving and vigilant fashion. In fact, UK visa solutions experts have revealed that 2019 will see a record number of emigrations from South Africa – they have already noted a 22% increase in applications in the past two years.
Citizens or enemies of the state
When presenting an analysis of the economic or financial state of affairs, it’s important to remain objective and present both sides of a story, but the numbers are so skewed at the moment that one has to look twice to make sure you are not presenting an absurd and erroneous piece to your readership. And with things hardly looking up, many of our peers in the country are starting to feel like enemies of the state – the pain is felt across the board; shared between races, genders and income groups.
The numbers don’t lie
One would ideally like to present objective views which don’t tarnish the reputation of a country and its leaders, but try as one might, the facts laid before us aren’t really painting a rosy picture. The numbers speak for themselves.
Which numbers are we talking about exactly? Well, there are quite a few statistics we could present, but here are a few of the more important ones:
It deserves to be noted that, with the exception of unemployment which has seen a slight decline in the past year, all other numbers are either falling or rising to our detriment.
To add further fuel to the fire, the leading party has once more announced their intent to nationalise the South African Reserve Bank (SARB).
Nationalisation of SARB – why not?
Of course, nationalisation of enterprises is nothing new. Many other countries have nationalised their central banks quite successfully. But for those countries where nationalisation of banks has worked, nationalisation of other enterprises has also been widely successful.
When we look at South Africa’s track record with nationalisation, a hair-raising trend emerges. In 2018, president Ramaphosa called State Owned Enterprises “sewers of corruption”.
For in addition to the SOE debt which increases by the minute, these nationalised enterprises have seen widespread irregular spending in the past few years. What makes it even more devastating is the fact that the government is required to cover much of the parastatals’ debt.
The above-mentioned figures do not include all SOEs, such as the South African Post Office (SAPO) and Airports Company South Africa (ACSA) which have also shown increasing debt and mismanagement. Additionally, Bloomberg reported a 75% increase in irregular spending at municipalities since 2010 (from R7,3 billion to R28 billion).
The question on all South Africans’ lips is therefore why our country would want to surrender another enterprise to the hands of our leaders when the existing state owned enterprises are mismanaged to the point of collapse?
President Ramaphosa has made it clear that the nationalisation of the SARB should not affect its independence from political interference, and yet time and again we have seen that this is exactly the trend. In fact, many factions have already indicated their intention to interfere on a political level – such as COSATU, the South African Communist Party, NUMSA and prominent members of the ANC.
The SARB currently has policies in place which prevents undue interference by any shareholder such as the 10 000 share limit per shareholder on their 2 million issued shares. Furthermore, they are only entitled to dividends of a maximum of 10c per share per annum (8c after tax) which means there is little financial gain to be had as a shareholder. Though the shareholders appoint a board, their ambit extends as far as oversight and administrative decisions; the board is not allowed to make any monetary decisions. General meetings allow – and even welcome – the attendance of journalists to improve transparency and accountability.
So why would we take a working system and change it? Indeed, nationalisation has worked in other countries, but what’s good for the goose is not good for the gander, and South African leadership has not proved capable of effectively managing SOEs, nor do they have the capacity to circumvent further operational and financial decay.
Gear up for protest action…
But are we ready to face the ire of trade unions once more? In addition to widespread blackouts by the power utility, the country has witnessed the devastating effect of strikes and protest action which has an equal drain on our economy.
A World Bank study found that the power utility has an excess of 66% employees and that South African SOEs generally pay more than double per salary compared to other countries.
With the restructure announced by Pravin Gordhan which will split Eskom into three tiers, an extensive restructure will commence which will see thousands of retrenchments. NUM workers at Eskom have already announced a planned strike for the election week in 2019.
Add to this the possibility that COSATU, NUMSA and other unions may intend to strike later in the year or in coming years to cripple the South African economy into submission, and we are once more facing bad news for our rands.
On the upside, NUMSA has agreed with Solidarity’s assertion that Eskom needs to ease off on their affirmative action policies if they are to retain a skilled workforce. But this has done nothing to sway the power utility’s intention to lay off a further 1 308 skilled white workers by 2020. Though affirmative action may have its place in redressing past inequalities, for a failing national provider which undermines the livelihood of all South Africans, it’s necessary to consider aptitude over race. It is unlikely, however, that Solidarity’s complaints will fall on lucid ears when Eskom will be seeing such sweeping restructure across the board.
So if we are looking at strikes, once more, what will the impact be?
In 2016 the Department of Labour revealed statistics of protest action in South Africa and the impact on the economy. At the time, the country had seen a loss of 946 323 work days, 122 strikes and a loss of R161 million for the year. Should we see more protest action this year, these numbers are likely to exceed 2016’s.
Other factors that impact the economy
As if the impact of Eskom power outages, pending SARB reform and looming protest action isn’t enough, there are other unavoidable factors at play, such as:
Fuel prices continue to rise, with the last increases earlier in March placed at 74c per litre for petrol and 93c per litre for diesel.
This not only affects motorists, but with many businesses and homeowners opting for generators to keep business and lifestyles afloat, the cost of living as well as services are affected.
South African farms are not only under threat by the looming land reform, but the violence which permeates the agricultural sector is driving many to desert their farms and ship off elsewhere.
Furthermore, farmers and agricultural workers in South Africa are under constant threat of violence and therefore highly vulnerable. Dan Kriek, president of AgriSA, has made it clear that attacks on farms aren’t a racial issue but one which affects all farmers and agricultural workers and that biased media which polarises racial groups is not helping the plight of the agricultural sector as a whole, which needs intervention on a grand scale.
With a national election in the pipeline, South Africa faces a rocky road ahead. Political parties are likely to hike up activity and vocalisation of others’ failures along with exaggerated boasts of their own competence. This will, as other years, up political tension across the board.
The election is also likely to constrain offshore investment sentiment in the country. Hugo Pienaar, Senior Economist at the Bureau for Economic Research at the University of Stellenbosch, stated that the positive buzz around Cyril Ramaphosa’s election as ANC president has all but died down.
Both locally and abroad, disillusionment at the president’s powers has filtered through the ranks and the results of the election could be the biggest indicator of South Africa’s economic growth and success. Should the ANC’s support continue to decline, so too will the confidence in its leadership.
The reigning party is, however, still likely to win the coming elections, but some believe the margin between the ANC and opposition parties to be growing. Though this is, to a certain extent, a good thing in that it will likely see to a more equal distribution of power and influence in the country, it is also likely to stir even more clashes between the parties and their following. It will also undermine the world’s confidence in the president’s potential and sway which may see to further economic prolapse.
What’s the verdict?
No matter your view of South Africa or your political orientation, the state of the nation should be worrying. It is admirable to maintain a positive outlook of the country – we have a remarkable resilience of mind, natural resources to boot and a constitution which is lauded around the world.
Nevertheless, one has to look on the facts with a sober mind and calculate how the lives of all South Africans are affected by the failing economy and mismanagement of national resources. Is it feasible to stay on indefinitely with the hopes that things may change? Maybe, maybe not, but it is a question we should all ask ourselves.
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