By Dennis George
President Cyril Ramaphosa announced in the State of the Nation Address (Sona) in February that South Africa was facing a stark reality.
This declaration was made even before the actuality of the global impact of the Covid-19 pandemic.
Within this national economic context, Sona made it clear that several state-owned enterprises (SOEs) were in distress and the public finances were under severe pressure, coalesced with high unemployment and low economic growth.
Finance Minister Tito Mboweni warned in the 2020 Supplementary Budget Speech that the country had accumulated far too much debt.
Covid-19 will add more debt and out of every rand that we pay in tax, 21 cents goes to paying the interest on our past debts.
To alleviate the financial impact of the pandemic, South Africa was forced to ask the International Monetary Fund for an R76.6 billion in emergency financial support under the Rapid Financing Instrument , which it received this week.
Worsening the economic crisis is Eskom.
Eskom, which has a near-monopoly on electricity supply, is taking a large toll on the economy and it is estimated that load-shedding and electricity disruptions caused serious losses to gross domestic product. The impact of electricity supply disruptions has further increased the cost of doing business, increasing the cost of living for families, while severely undermining employment creation and the achievement of higher economic growth.
The debt of Eskom is R450bn, mostly guaranteed by the government, and the company is struggling to service the interest on its borrowing due to falling revenues, gross mismanagement and rampant corruption.
To aggravate the situation for Eskom, Medupi and Kusile coal-fired power stations are years behind schedule and billions of dollars over budget.
The current Eskom board has suffered severe damage as a result of good corporate governance, when serious allegations were levelled against Eskom chief operating officer Jan Oberholzer for corruption, dishonesty and the abuse of power.
Many companies are being forced to source energy elsewhere.
Sasol, one of the huge electricity users, decided to build its own 600 MW of renewable electricity plants, followed by ArcelorMittal SA, which complains that unaffordable increases of electricity tariffs, as well as unstable and insecure supply of electricity, has had a seriously negative impact on the financial performance and operations of the company.
These factors have compelled ArcelorMittal to also install 100 MW renewable photovoltaic solar power plants at its operations.
In January, in a first, in recognition of the power challenges, the government embraced private power generation by companies and households.
As a nation, we cannot stop technology and we cannot stop the future from arriving.
Exacerbating the dire economic situation, South Africans carry the burden of the impact of corruption and the deficit of trust, while confronted by rising living costs, unemployment, unable to escape poverty, unable to realise their full potential.
The evidence was laid bare before the Zondo Commission of Inquiry to investigate allegations of state capture, corruption, fraud and other allegations in the public sector in South Africa as testimony after testimony explained the role of government officials. Evidence of corruption is also witnessed in corporate South Africa as well as in religious and sports organisations.
Corruption causes catastrophically inefficient economic, social and political consequences. This leads to public resources for critical development projects being less productive, less job creation as well as less growth being created.
Well-intentioned socio-economic policies are manipulated to enrich the few, reasons are invented to come up with new policies, which the country does not need, but which are devised to create a tender. In the end, no one takes policy-making seriously and implementation fails.
When corruption is institutionalised in an economy, investors are not interested in long-term investments, but rather focus on speculation.
Connected individuals try to “eat” as much as quickly as possible, to accumulate wealth before they are pushed from the trough by the next dominant factional group.
Moreover, it appears that it is so easy for the politically connected to live off “rents” that they prefer to have incentives rather than building brick and mortar enterprises to create jobs and provide support for the achievement of higher inclusive economic growth so that all can benefit.
The country needs new types of competitive productive sectors in energy, transport, communication, technology as well as manufacturing.
But in the current climate, corruption induces the de-industrialization of the country. Politically connected rent-seekers and monopolistic businesses milk the existing capacity, undermining new productive capacity by keeping out innovators, entrepreneurs and new ideas, from getting a start-up, of finance, mining rights, or trading licenses.
Some networks of institutions, lawyers, accountants, and certain media houses turn a blind eye to corrupt activities, while others are profiting handsomely, and advancing agendas for corruption to become the accepted social norm.
Covid-19 has exposed the weakness in the South African post-colonial-apartheid state - The Emperor is Naked.
The late veteran Andrew Mlangeni, speaking at Rhodes University, where he was awarded an honorary doctorate in 2018, .said: “Some of our political leaders have become corrupt – they are no longer interested in improving the lives of our people. They are busy lining their pockets with the money that is meant to help the poor people. What a disgrace!”
South Africa needs a new social compact.
Putting South Africa First
South Africa still faces legacy problems and other severe challenges in our national drive to create jobs, alleviate poverty, address historical inequality, and build a sustainable future for all our people both black and white.
To this end, the country needs a burgeoning manufacturing sector.
Our economy cannot achieve our goals based on importing most of the products we use.
A thriving manufacturing industry creates jobs and business opportunities, enables skills development and improves our competitiveness in global markets. Putting South African industry first should therefore be a priority for all South Africans.
Dr Dennis George is the executive chairperson of African Quartz and writes in his personal capacity. [email protected]
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