Much commentary has drifted under the bridge since finance minister Enoch Godongwana delivered his medium-term budget policy statement on Wednesday last week.
Our perilous position, which the minister has, I think, successfully contained, at least until February, does offer us some time to think more widely about what kind of economy we want. Specifically, all of us, whether we’re in business or government, need to understand the fuel in our economy — cheap Eskom energy and abundant logistics aren’t just in trouble. They’re gone. So now what?
The medium-term budget represents the people who wrote it and approved it. It is broadly conservative and there are elements that are symptoms of political discomfort, such as accommodating above-inflation pay hikes for public servants who preside over some of our worst outcomes, in health and education.
More interesting was what the minister said in the press conference; he did not want to talk to Transnet via the media. The logistics giant’s turnaround plan hits up the National Treasury for R100bn in cash and guarantees. In return, the plan says it will open up its infrastructure to private operators, with an independent regulator sitting in the department of transport.
The minister was pretty clear. “We are not going to give a bailout, whether in the form of a cash injection or state guarantees, until we are satisfied with the implementation of the logistics road map [by the presidency],” he said.
In other words, this deal is far from done because the Treasury, which is half-a-trillion bucks in the hole with Eskom, which hasn’t reformed a thing or added a watt of power, is fresh out of trust. His lukewarm response to the turnaround strategy is appropriate. He has no appetite for throwing cash at broken institutions when a functional institution can attract private capital. The fact that it is looking to the Treasury at all is a red flag.
Port’s dysfunction
A simple reading of this is to presume that the Transnet issue has been kicked down the road, at least until the budget in February. This gives everyone in the economy pause for thought. For good reason, the mines catch our attention when we worry about the state of our railways and ports. Mining is the bedrock of our economy, contributing about 7.5% of GDP and employing half-a-million of our compatriots.
But, as Business Day reveals exclusively today, the deterioration of the performance of Transnet’s ports is having dire consequences across the economy. Last year, 37% of fresh goods exported from the Port of Cape Town attracted some kind of fine or penalty for late delivery, all because of the port’s dysfunction. This hammered growers of citrus, blueberries and table grapes.
A source close to the industry told me that last year, in desperation, exporters chartered a jet to deliver produce just so they could meet a contract and hold onto some market share. Nobody made any money on that delivery — including the fiscus because, as one becomes tired of repeating, you cannot tax a loss. Naturally, the appetite for investment in capacity is weak.
The weeks heading up to the February budget offer us an opportunity to think about the infrastructure we need for the economy we have, and the economy we want. The history of infrastructure development in this country is a sordid affair, and it has had profoundly bad implications. The apartheid regime’s frantic overbuild of energy infrastructure, driven by a sense of global isolation and crisis, distorted the economy and the social landscape. It led to heavy industries such as iron, steel, ferrochrome and synthetic fuels developing here, all thriving on racialised labour abuses and electricity that has never been priced at its cost. It still isn’t — just look at the shocking state of Eskom’s balance sheet, as revealed last week.
Rushed projects
This is the apartheid hangover, made worse by a lack of strategic direction in the past 30 years and, of course, deepened by the scale and impunity of state capture and corruption. As our economy smashes painfully into these realities, we need to be careful not to repeat the mistakes of the apartheid regime and plan in a state of panic.
Big, rushed, corrupt projects end up creating horrible effects on the ground, none better explained than the work NGO GroundWork did to illustrate the woeful externalities of the development of the Medupi power station in the Waterberg. A cascade of money drew in thousands of people, creating more unemployment and worse social and environmental conditions as soon as the build was done (and, as we know, producing little actual electricity).
Now is the time for a thoughtful approach. Unlike during apartheid, the West doesn’t hate us, new regional powers are keen on having us on their team, and capital is itching to pile into the opportunities it sees here. Our crisis is internal, and we ought to build for a future that has half a chance of occurring.
What does that look like? Might it be true to say we will once again enjoy cheap and plentiful power from private renewable supplies, but be constrained by shambolic logistics in the medium term, and the fact that wages will need to increase above inflation if we want to improve productivity and social conditions? What does that mean for your business?
For the state, the biggest lever is to mend the railways and the ports. Like an old Isuzu bakkie, you must change the oil every 10,000km so that the grapes aren’t vrot by the time they get to their destination. But a longer-term vision is required too, and Godongwana is clever enough and tough enough to deliver one if he has the right support.
Our economy was built on an oversupply of everything based on paranoia and racism. As Godongwana contemplates the mess, and when he speaks in February, let’s hope his horizon stretches beyond the election, and that he has a vision for a more prosperous future that throws off our bad old habits of panicked, paranoid central planning and vast state interventions that cause more harm than good.
• Parker is Business Day editor-in-chief.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.