Behind the curve is a term that can be used in many different contexts. It gets used much by those who analyse central banks and their moves on interest rates.
Would they be too slow in raising rates, acting when faster inflation had entrenched itself, resulting in more severe interest rate increases than there would have been otherwise, to the detriment of the real economy and markets such as equities and housing?
They can also do it the other way and move in anticipation of future inflation, with the rationale being that this would ensure a more stable outcome. It does not always work out like this, such as when the European Central Bank raised interest rates in 2011 in the middle of the region’s sovereign debt crisis and when deflation risks were far from having been dealt with, a policy mistake that was reversed months later.
A couple of headlines this week made me think how unfortunate it is that SA, with its many pressing problems, has leaders who are consistently behind the curve.
Not in any order of importance, this was the huge revelation by the health minister, Zweli Mkhize, that SA will not be meeting its target to vaccinate 40-million people by the end of 2021, and deputy president David Mabuza informing the nation that it cannot afford an overstaffed Eskom. It is amazing that people who are supposed to lead are seemingly also the last to know.
“We must scale down,” Mabuza said during a Q&A session in the National Council of Provinces on Thursday, before pointing out that “the amount of workers has doubled since 2008, but the amount of energy we are producing is less”.
And for those who are familiar with how these things work it “means the demand is getting less [as] a lot of people have opted out of Eskom, so the number of employees does not justify the business case”. As one might have expected, he then went on to explain how the government was not going to do anything significant about it and would instead rely on natural attrition and voluntary packages to cut about 6,000 jobs in the short term.
To think it was just more than two years ago that Jabu Mabuza (no relation to David) was the chair of Eskom and he was saying the utility was overstaffed by 30%, implying a much bigger cut than the one proposed by his namesake. Over the years it has been noted how ludicrous it would be for any business to be consistently reducing output while increasing its staff cost. Eskom managed to double its workforce.
This was one of the issues that undermined the reign of the previous CEO, Phakamani Hadebe, who, perhaps naively, though he would have the support of the shareholder — government — when he proposed a pay freeze. By coincidence, the day after Mabuza spoke last week, the Council for Scientific and Industrial Research (CSIR) issued a report with a number of statistics on energy generation in SA.
Despite the devastation brought about by Covid-19 induced lockdowns, meaning that large chunks of the economy were closed, Eskom managed to subject the country to 859 hours of load-shedding, “seemingly the most intense yet”. It said 63% of the cuts happened before the lockdown, in the first three months of the year.
Much has been said about Eskom’s death spiral, where its unjustifiable price increases, and irregular supply, drive its paying customers off the grid, to which it responds by charging the remaining customers even more, perpetuating the cycle.
According to the CSIR report, demand dropped 7.8% over the past 10 years, though it noted that most of this was seen in 2020. Stripping out the Covid-19 impact, it found that demand fell an average 0.4% over the past decade, something that UCT professor Anton Eberhard said on Twitter will become more acute.
That the man who supposedly leads the Eskom war room, an honour that previously was bestowed on President Cyril Ramaphosa when he was deputy, is finally aware of this is good news of some sorts, but do not expect any more urgency than was evident in the wake of that 2018 press conference when the other Mabuza and public enterprises minister Pravin Gordhan promised that there would be light at the end of the tunnel.
As with Eskom, something going in the deputy president’s favour in relation to his other job, chairing a committee to ensure SA’s access to vaccines, is that he is not burdened by an overly expectant population. Government blundering has become an entrenched way of life. It would be silly to expect anything else.
It was notable that there was hardly an outcry, or even a resigned shrug, when Mkhize finally said SA would not be getting its promised 40-million vaccines in 2020.
He was merely confirming what is public knowledge, and the real surprise was that it took him so long to catch up and be straight with South Africans, after weeks of calls for some kind of road map to indicate what happens next after health workers have had their vaccines. It is now looking increasingly likely that the country will get to the winter months without much protection. On top of the humanitarian health disaster, we will face the prospect of more economically damaging lockdowns.
On this one, the government, if it actually knew how to communicate, could have easily made the case that this was not its fault. Yes, like Europe, they blundered with not striking deals with pharmaceutical companies in time and had to be dragged to doing so by an angry public from late 2020.
But the SA government cannot be blamed for the production and distribution problems that mean even in rich countries people will still be waiting for their first vaccines more than a year from now. This point it could have made itself much earlier.
Our ministers, forever behind the curve, can’t even grab a lifeline when it presents itself.
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