The jury is out for economists on the wisdom of the energy announcements by President Cyril Ramaphosa in his state of the nation address (Sona) last week until there is evidence of implementation of the plans.
Investec economist Annabel Bishop said the president’s address did not inspire the markets, which take a wait-and-see approach to delivery.
“SA’s slow and often poor implementation of its goals has been the key determinant of its weak economic growth rate and hence exacerbating unemployment,” Bishop said. “The state has numerous plans, insufficient delivery and a poor track record overall, making the state of disaster seemingly necessary for the resolution of the electricity crisis.”
Other economists did not believe the state of the nation address on its own would shift the needle in terms of boosting business confidence and investment. More details were required on what would be done to address the load-shedding that has had a crippling effect on the economy.
RMB head of research and chief economist Isaah Mhlanga said business had taken a view to wait and see for implementation and not to rely on announcements on the electricity sector which though marginally positive needed to be followed through with implementation. Without this the announcements would come to nought, he said.
“I don’t think it is going to change anything until we see movement,” Mhlanga said.
The budget to be tabled in parliament by finance minister Enoch Godongwana on February 22 had the potential to have a positive impact on sentiment as it might commit funds to underpin implementation.
Absa chief economist Peter Worthington also believed there was not enough detail provided in the state of the nation address to shift the needle.
“What business is going to want to see is clear action to sort out load-shedding. What was announced in Sona doesn’t tell us really whether that will happen or not. Business wants Transnet’s logistical constraints and challenges resolved and wants to be very confident that that is happening. I don’t think you can know that from Sona.”
Citi economist Gina Schoeman also emphasised the need for implementation if Ramaphosa’s announcements were going to improve SA’s economic prospects. “We don’t know all the details of the timelines and what processes are involved.”
Ramaphosa’s announcement of tax incentives for the installation of rooftop solar panels by individuals and businesses was a “huge step in the right direction”, she said. But here again more details were required which could be provided in the budget in terms of the amount it would cost, what the Treasury thinks is possible and its impact on the economy.
Schoeman said that Ramaphosa’s undertaking that the government would support Eskom in securing additional funding to purchase diesel to run its open-cycle gas turbines for the rest of the financial year could have a beneficial effect on the economy as it will reduce the severity of load-shedding. If load-shedding was reduced, economic growth forecasts would improve.
Regarding the announcement of an electricity minister, she said a lot would depend on who was appointed but she also pointed to the difficulty of having three ministers with oversight over Eskom.
Intellidex head of capital markets Peter Attard Montalto did not believe growth forecasts would change as a result of Ramaphosa’s announcements.
“The state of disaster is dangerous and the new minister of electricity is mad and will create more confusion. The state of disaster was unnecessary, against legal advice and against the wishes of civil servants,” Attard Montalto said.
The SA National Energy Association (Sanea) also emphasised the need for implementation. “We must stop talking and start doing!” it said in a statement.
“The need to increase the focus on execution and delivery, fast-track decision-making and improve integration and collaboration in ensuring effective outcomes for these interventions (announced by Ramaphosa) are the most critical leverage points for energy security,” Sanea said.
“The declaration of a state of disaster and the appointment of a minister of electricity as a means to heighten focus, leadership, and create a sense of urgency are welcome signs that the government is taking the electricity emergency seriously. However, the devil will be in the detail (which we anxiously await) when it comes to ensuring that these plans are delivered and can make a profound, positive contribution to arresting the sector challenges and turning the current situation around,” Sanea said.
Economist Iraj Abedian said Ramaphosa’s decision to create a minister of electricity in the presidency to address load-shedding will politicise a matter which is essentially technical.
Abedian said there was nothing political about energy generation, co-ordination of energy supply and energy distribution. They were technical matters that required technical people to deal with them.
“The more you politicise it you bring exogenous factors into the equation that is bound to either raise the price or delay, or both,” said Abedian, who is CEO of the Pan-African Investment and Research Services.
Neither will it resolve the logjam created in the energy sector by the conflict between mineral resources & energy minister Gwede Mantashe and public enterprises minister Pravin Gordhan, two seasoned politicians who are unlikely to be swayed by a junior ANC minister in the presidency. This conflict had caused endless delays in the implementation of the energy plan, Abedian said.
Adding another minister would just add to the delays and tensions.
Abedian said the decision to introduce a state of disaster and create the new minister was a “cop out” on the part of Ramaphosa from his personal responsibility to resolve the conflict between his ministers and get reform of the energy sector moving.
Whether the state of disaster was a good initiative or not would depend on the nature of the legislation and regulations but it was a symbolic measure which gave the impression that something was being done about the load-shedding crisis.
Energy analyst Chris Yelland had mixed feelings about the state of disaster.
“On the one hand I do think there are certain issues that can be expedited through some emergency powers under a state of disaster, but these limited actions should be clearly defined upfront with timelines and costs. This should not be a blank cheque or open–ended arrangement. And I fear that this is not the case.”
The Energy Intensive Users Group (EIUG), whose members account for over 40% of the electrical energy consumed in SA, broadly welcomed the pronouncements by Ramaphosa, specifically the announcements on rooftop solar incentives, diesel support to Eskom and the reiteration of Eskom debt support as positive.
“We also believe the pronouncement on the minister of electricity and the national state of disaster declaration are intended to show clear leadership of the crisis, the urgency required and the intent to foster an enabling environment for recovery and long-term prosperity.” it said.
However. more clarity was required on how the state of disaster would be used to resolve the crisis. The group appealed to Ramaphosa to appoint a person with industry and technical knowledge and a demonstrated ability to deliver as minister of electricity.
ensorl@businesslive.co.za
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