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The extreme nature of the reaction to the electricity price increase is about a number of things, perhaps most obviously:
- the public and institutional suspicion that the crisis in Eskom is due to cronyism at a management level and looting via tender abuse by a politically connected elite, and
- the Great Recession has left the society, but particularly the poor, deeply vulnerable to price shocks like this one.
The National Energy Regulator of South Africa has granted Eskom the right to increase its tariff 24.8 percent this year and a further 25.8 percent for 2011, and 25.9 percent for 2012.
The problem Eskom is attempting to address is its increasing inability to meet growing demand for electricity because of capacity constraints in the generation, transmission and distribution process – with this capacity already having caused the economic and social chaos of the rolling blackouts two years ago.
The price increase immediately:
- makes it viable for Eskom to raise the more the R385 billion it has estimated it needs to upgrade its generation capacity;
- reduces demand.
Either way (or rather, both ways) the constant threat to the extremely narrow reserve margin (the small safety gap between what is demanded by industry/society and what Eskom can supply) is immediately relieved.
The SACP and Cosatu are outraged. The SACP calls this a “catastrophic betrayal of the poor” and places the blame squarely on “a neo-liberal economic regime that did not encourage increased state investment”. Cosatu speaks in similar terms, but also appears to acknowledge that the increase is less than the 35% per year that Eskom wanted.
The level and timing of the increase is a political matter and it is quite likely that Eskom built a margin into its request to give the regulator and, by popular implication, government room to wriggle and demonstrate its caring and thoughtful approach. And this is as it should be in the political kingdom.
To make a real assessment of the validity and necessity of the price increase one would need a detailed and comprehensive analysis of Eskom, its productivity and its commercial soundness. In the absence of such an analysis here are two general points:
- We have to move towards costs recovery in this kind of utility. It is appropriate to protect the poor and possibly subsidise the use of this kind of product, but the society as a whole must pay the price of the secure and ongoing generation, transmission and distribution of electricity. Hiding those costs through the state subsidising Eskom is a mistake.
- It is crazy that this far down the road we still have a state utility that has a monopoly on the generation and transmission of electricity. What is it about the last hundred years of human history that could suggest to anyone that a state institution is likely to generate electricity more efficiently, cleaner and more securely than a competitive private sector and a traded electricity market?
Aside from the most satisfying stitching up of the ANC Youth League president there were two other excellent bits floating up through the dross of the weekend news; both from the excellent www.timeslive.co.za.
Firstly, Ray Hartley (editor of The Times and the Times Live website and author of the exceptional blog The Wild Frontier) interviewed Jeremy Cronin about, amongst other things, the dangers of populism. Cronin talks with clarity of the clear and present danger of a form of fascism that is taking root – and being encouraged to take root – in the mass of 18 – 25 year olds who are unemployed and not in any form of tertiary education in South African. Listen to him speak of “big man” authoritarian politicians dealing in patronage and claiming a shared victim-hood with under-serviced poor; and listen to him warn of the similarities of our present to both 1930’s Germany and present-day Zimbabwe. There is no question in my mind that the red finger of his accusation is pointing at the likes of Julius Malema and his crew. I highly recommend the interview; catch it here.
The second piece is from Ray’s colleague Mondli Makhanya, editor of the Sunday Times. He warns that the current ANC leadership is airbrushing both Thabo Mbeki and FW de Klerk out of history in much the same way as Stalin erased the image of Trotsky. It is an interesting point and, now that he mentions it, clearly true. Catch it here.
This is not a budget review. There are just too many of them out there and I am in the middle of a roadshow to the South African fund management industry where the budget is being VERY well received.
This is more a comment on the whole budget season that yesterday’s excellent National Budget began.
The good thing about Zuma’s presidency has always been the fact that he has let every contending faction into the ruling tent.
But, I hear you cry, they are milling about in there in confusion, stepping on each other’s toes and bellowing and mooing in a kind of bovine riot as they fight to get as close as possible to the trough.
Well yes, but aside from that. You see, the Alliance of the disaffected (thank you Stephen Friedman) always consisted of an unhealthy number of BEE wannabes who wanted their turn to tear at the dwindling cherry. But they were never alone. The communists, the trade unionists, the ANC democrats who thought Mbeki had sold the revolution down the river and then a whole host of people whose contribution had been thwarted by the logic of the Mbeki imperial presidency (avoid real participation by the structures of the party, the alliance or even parliament in decisions, because they will go against you) they were all in there together. The fight between the “communists” and “nationalists” is very much a fight within the Zuma camp.
Thus, we come to the first season of the Zuma presidency in which their plans and budgets are revealed. It is important to remember that this is the first real political season of the Pirates of Polokwane (thanks Zapiro).
Well, so far we are seeing the first rays of light we have encountered in many dark months. The thugs and gangsters and vampiric crony capitalists and the racially chauvinist cabal at the centre of the security establishment (all of whom make up an important element of Zuma’s support base) have had all the running and all the press and have done all the bellowing, mooing and grunting at the trough.
Now it is the turn of the technocrats. This is the crew of lefties and trade unionists and dour financiers and tax collectors who were included in the Zuma cabinet, and gave many of us some hope to cling to in the darkening months of the whole second half of last year.
Yesterday Pravin Gordhan revealed a thoughtful budget that took all of the continuity that Manuel always showed, but added a real democratic inclusiveness that the previous minister was never able to demonstrate – given his crucial position in Mbeki’s non-inclusive regime.
Today we will hear Rob Davies and the DTI talking “industrial policy”. This is policy that sets up a combination of incentives and disincentives to shape the kind of growth we will achieve: how inclusive or job rich it will be.
During the next two weeks we will hear parliament debating the budgets of each and every department of government and finally all will be revealed.
I think it is worth treating this process with an open mind.
I will, as far as possible, provide some insight into the process as we go along.
I have whipped through the State of the Nation address while Jacob Zuma is just getting started. My initial impression is good, maybe even very good …. but maybe there has just been so much bad news and poor performance that any detailed and thoughtful stuff from government is likely to impress me …
Here are some bits and pieces:
As always the address was long on the broad brush, leaving the details to ministerial budget votes over the next few weeks.
However, there were interesting bits:
First a claim that no-one appears to be believing …. I will have to check these figures and see how they arrived at them:
We are pleased to announce that by the end of December, we had created more than 480 000 public works job opportunities, which is 97% of the target we had set.
More money for public infrastructure – power and transport
Over the next three years government will spend R846 billion on public infrastructure.
One of the most favourable public expenditure/infrastructure statements was:
Among other things, this will look at the participation of independent power producers, and protecting the poor from rising electricity prices.
We will establish an independent system operator, separate from Eskom Holdings.
Money to subsidise the employment of first time young workers
Proposals will be tabled to subsidise the cost of hiring younger workers, to encourage firms to take on inexperienced staff.
He announced a plan to hold departments accountable:
The Ministers who are responsible for a particular outcome, will sign a detailed Delivery Agreement with the President.
It will outline what is to be done, how, by whom, within what time period and using what measurements and resources.
Very concrete education targets:
We aim to increase the pass rate for these tests from the current average of between 35 and 40% to at least 60% by 2014.
Results will be sent to parents to track progress.
In addition, each of our 27 000 schools will be assessed by officials from the Department of Basic Education.
This will be recorded in an auditable written report.
We aim to increase the number of matric students who are eligible for university admission to
175 000 a year by 2014.
Brutal admission on certain health failures:
We must confront the fact that life expectancy at birth, has dropped from 60 years in 1994 to just below 50 years today.
We are therefore making interventions to lower maternal mortality rates, to reduce new HIV infections and to effectively treat HIV and tuberculosis.
We are implementing plans to increase the number of police men and women by 10% over the next three years.
Concrete stuff about housing and mobilising private sector funds:
We are working to upgrade well-located informal settlements and provide proper service and land tenure to at least 500 000 households by 2014.
We plan to set aside over 6 000 hectares of well-located public land for low income and affordable housing.
A key new initiative will be to accommodate people whose salaries are too high to get government subsidies, but who earn too little to qualify for a normal bank mortgage.
We will set up a guarantee fund of R1 billion to incentivise the private banking and housing sector, to develop new products to meet this housing demand.
Twenty years ago today Nelson Mandela was released after serving 27 years in prison. Zapiro, as always, is the most elequent in his praise of the old man.
Jacob Zuma will deliver his State of the Nation address tonight, in part in honour of the service and leadership of Rohlihlala, in part to stand briefly in the aura of the respect and love the great man still commands.
Here is a radio interview that was not conducted with me this morning:
Why would the ANCYL want the state to grab 60 percent of an ailing mining industry?
Because Julius wants everyone to be able to afford a R250 000.00 Breitling like the one on his wrist …
oops sorry, wrong piece of paper … here’s the right one:
Because some corporate finance wide boy has worked out a way to salvage a slew of BEE deals that are under water; deals that were premised on the continuation of the commodities super-cycle into the far and distant future.
How will nationalisation help?
The ANCYL are proposing suspending the issuing of licences; they want the state to set up a mining company and they want the state to nationalise 60% of each existing and all new mining operations …
Yes, but how would that help BEE mining deals?
You think this government would not pay compensation, proper market related compensation, if it came to take 60 percent of mines belonging to Tokyo, Patrice, Cyril, and Mzi … and Saki and a few others? They will pay, trust me on this.
So you think it is just a scam?
… no, not only a scam. Nationalisation is a traditional badge of radicalism. In an environment where the majority of South Africans have not benefited much from liberation it is politic for an organisation like the Youth League to assume the posture of heroically trying to take the wealth back from the greedy mine owners and give it to the people.
But isn’t it a fact that the mining houses make huge amounts of money and pay workers poorly and feed nothing back into the communities they work in?
Hmm, yes that is mostly true, but the big multinationals have learned to be on their best behaviour: environmentally friendly, money to local communities, good safety records …. the way to get the most out of being endowed with minerals is make those requirements as stringent as the productivity margins on any one operation allow. So charge royalties and tax them and require a whole range of social goals be fulfilled ….
But isn’t that what the 2002 Mineral and Petroleum Resources Development Act does?
Exactly. That act set up the Mining Charter and was based on a brutal and honest exchange between government and all the big investors in our mining sector … remember the leaked draft of the Mining Charter, the huge sell-off, the (then) Minister of the (then) Department of Minerals and Energy rushing around the world’s financial centres explaining government’s intentions with regard to the proposed Act and the BEE process … then the long struggle to set the level of royalties …. this is a process that we have been through …
But surely government can change its mind, and say: no we want more from the sector?
Of course it can – and investors have always treated that as a risk; they would have preferred a clause somewhere promising set levels of BEE ownership and unchangeable targets for the various aspects of the codes. Investors hate governments shifting the goal-posts. But this proposal is a lot more than shifting the goalposts. Nationalisation along the lines the Youth League is proposing is …. ‘a whole new ball game’, so to speak.
But surely we need to get the most out of our mineral resources – for the benefit of the poorest South Africans?
Why do you think state ownership of mines is likely to make them more productive … better generators of state funds, fairer to the workers … better for the environment …. more likely to feed back resources into local communities? All governments’ records as owner/managers of companies is appalling. And let me say that THIS government’s record as a manager of the assets and resources it inherited stands out for reasons that probably no-one wants to brag about. The way to get the most out of the mines is to leave them to the professionals and tax them and oblige them to deliver certain social goods to just this side of the profitability margin.
Well, we have to leave it there … thanks Nic, and thank you all for listening …
I am trying to work out if Jacob Zuma is condemned to be a one term president; shuffled off the stage by a shamefaced ANC leadership as soon as humanly possible.
I think he will be, unless he is saved by a titanic power-struggle that is not settled in time for the 2012 ANC national conference and centenary. That way he might blunder on, apparently happily, until 2017. Heaven forbid.
There was something endearing about our president’s deep chuckle at Davos last week after he defended his polygamy:
That’s my culture. It does not take anything from me, from my political beliefs, including the belief in the equality of women. (Chuckle, chuckle, chuckle)
But ‘endearing’ became ‘tragic’ when three short days later the Sunday papers brought us the slightly belated news of another happy event in Jacob Zuma’s life: the birth of a baby daughter to proud mum Sonono Khoza, daughter of Iron Duke Irvin Khoza.
I am forced to assume the story is true; that Jacob Zuma is the father of Thandekile Matina Zuma. He has neither denied nor confirmed the rumour but his record in this department would make it unsurprising that the number of his (known) offspring rises from 19 to 20.
There is little that needs be said about this matter, except maybe: Sonono is 39, her sister died of AIDS; Jacob Zuma is 67, the president of South Africa and the guy who infamously took a shower after having unprotected sex with another young woman, someone who was HIV positive, someone who immediately went on to accuse him of raping her. He married his fifth wife in January – bringing the number of current wives to 3. Enough.
Those who conspired to oust Thabo Mbeki by backing the then beleaguered Zuma must be feeling queasy about how this first term is going.
Mbeki spent much of 2006 and 2007 arguing (never directly but always strongly) that this man appeared to have his pants around his ankles and his hands in the till; he was just not the right sort of chap to inherit the mantle that had been passed down from Mbeki himself, from Madiba, from OR Tambo and a host of other legendary leaders.
Zuma’s Polokwane backers, that peculiar alliance of traditional ANC democrats, trade unionists, criminals who Mbeki had cleaned out of the state and BEE aspirants who wanted their bite at the cherry, decided to ignore the evidence of Zuma’s moral turpitude and take the gap he presented.
I wonder if those who genuinely wanted to improve governance or fix the ANC’s internal democracy and those who believed Mbeki had failed the poor consider this path we are on, on balance and after all is said and done, to be worth it?
None of the things that apparently so concerned them has been fixed. Most problems have deepened and the most serious problems, especially the rise to dominance of vampire capitalism and corruption, are significantly worse today than they were under Mbeki.
The trends might have been heading this direction anyway, but we feel adrift: leaderless and defenceless against the predations of the hordes of pirates who came along for the Polokwane ride.
So do not look to the president for the strength – of politics, ideology or character – to lead us through this swamp.
Take a trip through the blogs and discussions about this matter in the popular media. It seems that aside from satisfying his own needs and whims, Zuma has achieved one thing: he has become grist to the mill of racists and Afro-pessimists everywhere.
They love him, in a complicated and twisted way, because for them he confirms their deepest fears and hatreds.
And for this, we are all significantly poorer.