Don’t believe the promises of politicians
But when they announce life will get worse before it gets better, believe that
When politicians promise new free goods and services or the enhancement of existing ones without properly articulating how that will be funded, don’t believe them — especially ahead of what might be a watershed election in 2024.
When they announce that the country is in a difficult position and life will get worse before it gets better, believe them but also believe it will be far worse than they say. When a technocrat in the public service says winter is coming and it will be hard, believe them and adjust accordingly. As John Maynard Keynes said: “When the facts change, I change my mind — what do you do, sir?”
Let me provide a summary of what happened with load-shedding this week to try to capture the operating conditions for businesses, and the feedback from clients who are in what I call the trenches of the SA economy. I am also taking this opportunity to provide a partial response to a letter in the most recent edition of the Financial Mail, in which the writer suggests some business leaders are insulated from the real world and their positive views on SA are therefore misplaced (“Top executives isolated from SA’s reality”, May 11).
On May 7 Eskom announced that SA will be on stage 6 load-shedding until further notice. But according to EskomSePush, now the default app for load-shedding information, my area will be without power for 11.5 hours a day. On Monday I had no power between 7am and 11.30am, and 3pm to 7.30pm. On Tuesday I was powerless from 5am to 7.30am and 1pm to 5.30pm. This continued throughout the week, meaning electricity was available only for a maximum of five hours a day during working hours.
The feedback from our clients this week amounted to the following: for businesses that have a need to operate continuously, this level of load-shedding is devastating. In fact, many of our clients say they can operate under stage 3 or below, but beyond stage 3 things become extremely challenging. Take the five-hour electricity availability under “stage 6” as an example. Machines need to heat for an hour to prepare for production, which with the break in availability leaves only three hours of actual production.
“Hobbled local production means jobs are lost and tax revenues from both employees and corporates dry up.”
Some of the companies that have contracts to supply particular quantities of goods cannot meet their contractual obligations for domestic production due to these severe load-shedding schedules, especially when they chop and change. These companies are forced to shift from domestic production to imports so that they meet the contractual obligation. Hobbled local production means jobs are lost and tax revenues from both employees and corporates dry up. This lost production, and therefore jobs, becomes permanent as companies lose productive capacity and credibility.
The long-term implication is that the import bill of the country will likely rise going forward due to the inability of domestic companies to produce under severe load-shedding. Already we have a significant influx of motor vehicles from China and India, which have resulted in the domestic motor sector’s trade surplus halving to just under R20bn for 2022. The current account deficit will widen and put pressure on the currency, which will in turn put pressure on inflation and interest rates.
Earlier this week I tweeted that when the state is incapable of providing a service that is required by society it must consider privatising that service. There were a lot of responses that opposed privatisation, but also many that supported it. This is an ideological battle, but what cannot be avoided at the end of the debate is that the country remains without a service and society is going backwards.
Fortunately, the government understands this, which is why there is an increasing openness to collaboration with the private sector to solve the country’s big issues.