BUSI MAVUSO: Importance of secure power to come to light again in GDP figures
The importance of a secure electricity future will be highlighted this week with the release of the second-quarter GDP figures. These are expected to show further evidence of the economy’s continued rebound from the ravages of 2020. One can only imagine how much stronger the rebound would have been had we not had a bout of load-shedding in conjunction with an unavoidable increase in lockdown restrictions in June as we faced the third wave of the pandemic.
From expansion of 1.1% in the first three months of the year, some economists have placed their forecasts for growth in the quarter to end-June between 0.5% and 1%. The figures aren’t inspiring, especially considering that the GDP figures for the third quarter will be shaped by level 4 lockdown, the civil unrest in July and a cyberattack on Transnet that affected its port operations.
To say our economic growth prospects have dimmed in the wake of these developments, as a recent Bloomberg report warned, is truly an understatement when I consider a jobless rate that is the highest of the 80 economies tracked by Stats SA. However, as gloomy as the streams of data are set to be in the coming months, there are areas in which we can take greater control of our prospects. Ensuring secure electricity supply after about 13 years of instability is where there’s been much regulatory progress in 2021. We can’t relent.
As part of the country’s economic reconstruction and recovery in the wake of the pandemic, finance minister Enoch Godongwana told the Business Unity SA annual general meeting that the state was working to strengthen the security of supply, including the unbundling of Eskom into three separate units, while implementing a just energy transition towards a low-carbon economy. “These developments pose serious policy questions about the future of the electricity supply industry,” he said. “This will effectively introduce competition in the sector.”
We support these measures by the government. The plans were drafted long ago and just required the conviction to implement them.
As we focus on building generation capacity in the medium to long term, we have much invested in the health of Eskom to reduce the frequency of load-shedding that has dampened our growth prospects for over a decade.
Last week, the parastatal released annual results that were marginally better than expected and it managed to contain primary energy costs and employee expenses. These were positive steps, but costs were also kept in check by slower investments, yet this investment is vital when you consider that Eskom’s ageing fleet of power stations is much in need of upkeep to avoid further load-shedding.
The results failed to ease frustration from investors seeking clarity on reaching sustainability in Eskom’s balance sheet, especially when you consider the bill facing the company in its just energy transition. That will have to incorporate decommissioning costs, social support plans and, most importantly and most costly, transmission grid strengthening. All these are likely to come in well over R300bn over the long term. Yet its debt sits at about R400bn.
This is clearly not a sustainable position. Eskom’s plans are hobbled and, by extension, so are SA’s plans.
The government as sole shareholder has to make a call on Eskom’s balance sheet. Deputy finance minister David Masondo has raised the prospect of an eventual partial listing of the 98-year-old company on the JSE. Given its financial position and corporate structure — let alone the difficult politics that any such step would have to circumvent — that seems a distant and unlikely prospect.
Whichever path we choose, we must ensure it is one that takes us towards a secure electricity future and a higher economic growth trajectory. As Godongwana reminded us, the SA economy has grown just over 1% for almost a decade in an environment when population growth averaged 1.6%. “The result has been a decline in per capita income. In other words, we have become poorer as a nation.”
There’s no way of attaining healthier growth rates without dealing with the elephant in the room: our lack of electricity capacity to meet the demands of this economy. Only that way can we become richer as a nation.
• Mavuso is CEO of Business Leadership SA, an independent association of the leaders of some of SA’s biggest and most well-known organisations.