You have to wonder whether President Cyril Ramaphosa would invest a single cent in a business that grew its staff by 16 000 in ten years, yet repeatedly defaults on delivery, and is R435 billion in the red.
He probably wouldn’t, clever man that he is.
The question is, why would he expect the rest of us to?
The deeply indebted, bloated and incompetent Eskom, described above, is not only a bad investment proposition – it’s only just a going concern.
Yet, in its election manifesto unveiled with all the customary hoopla in January, the ANC proposed that all South Africans who have the foresight and discipline to put aside savings for their retirement – a not insignificant contribution to the country’s economic and social stability – should be compelled to see their hard-earned money channelled away from the sound investments they and their advisers may choose into projects of the government’s choosing.
Among the options specifically mentioned in the manifesto for such channelling – euphemistically referred to as ‘prescribed assets’ – is ‘energy generation and distribution’. That’s the bottomless pit we know as Eskom.
Some may say, well, the ANC hasn’t specifically said this is what it is going to do.
Far from being reassuring, however, this is actually reason for greater alarm. The governing party has given a specific undertaking to investigate prescribed assets to use as it sees fit, but, less than two months from the 8 May election, has not found it necessary to share with voters what exactly it has in mind.
And this after declaring its commitment to prescribed assets not just once but twice in the election manifesto of 12 January.
The first mention is preceded by a reasonably accurate – but, in what it does not mention, extraordinarily dissembling – summary of where South Africa stands economically.
‘The rate of investment in the productive economy and infrastructure has slowed in the recent past,’ it says. ‘Increasing such investments will help us grow the economy faster, create jobs and boost incomes. This should help us to strengthen our infrastructure for more roads, schools, toilets, clinics and hospitals, housing, public transport, communications systems, energy generation and distribution.’
Yes, indeed. Investment is South Africa’s most urgent priority – and, if we get it, faster economic growth, more jobs and higher incomes will follow.
But instead of admitting that what is deterring investment is wrong-headed yet stubbornly retained policy the ANC proposes more of the same. Expropriation without compensation has been proved to be an investment killer over more than a year now.
For what the manifesto goes on to say is that ‘we will … investigate the introduction of prescribed assets on financial institutions’ funds to unlock resources for investments in social and economic development.’
Further on, the manifesto declares: ‘The ANC is committed to a programme to transform and diversify the financial sector, including state, co-operative and mutual banking. We must do more to address the role of the financial sector in national development, including problems of access to funding and capital for small enterprises, housing, township and village enterprises and infrastructure.’
To this end, it says: ‘We will … investigate the introduction of prescribed assets on financial institutions’ funds to mobilise funds within a regulatory framework for socially productive investments (including housing, infrastructure for social and economic development and township and village economy) and job creation while considering the risk profiles of the affected entities.’
Why, South Africans must ask, are their taxes not being used better for the many much-needed ‘socially productive investments, instead of being squandered or allowed to be stolen?
If the government got that right, who knows, investors might well choose on their own to invest in Eskom. Properly managed energy generation on a continent whose economic potential is so high could be a prime investment option.
But that’s not where we’re heading – we’re going in the other direction; on top of high and numerous taxes, the governing party is out to get new sources of ready cash.
The tragic irony is that, in the process, it will only reinforce the very thing it imagines it can overcome … the slowing ‘rate of investment in the productive economy and infrastructure’.
As economist Mike Schussler put it at a briefing at the Institute of Race Relations last week: ‘If your money is invested in Eskom and all this mismanagement and wastage is happening, Eskom will say “we do not have money to pay you back” and then you get less or nothing of what you have put in. You are going to die poor.”
Together expropriation without compensation in the property sector, you can just imagine what investors think about this.
It is a serious risk, and one the IRR is determined to fight – not just for the 16 million South Africans who are members of the country’s more than 5 000 active pension funds and their millions more dependants – but for all citizens whose economic and social wellbeing depends on sane policies capable of triggering and sustaining the investor-driven economic growth on which a better future depends.
Morris is head of media at the IRR.
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