If EWC continues on its disastrous path, today’s load shedding will be matched by food shedding, followed by an economic blackout from which South Africa would struggle to recover.
Load shedding is back, and is likely to be with us for some time to come. That is the case even if we are currently enjoying a reprieve, with no load shedding immediately scheduled. A couple of weeks ago, Eskom conceded that we’re looking at around 6 months before we’re out of it – so maybe we’ll be okay by Christmas, but maybe we won’t. After all – it’s been noted over and over – we hit Stage 4 on a warm Saturday. And winter’s a-coming.
Something is deeply wrong. It’s not only concerning in itself, but is a warning for the whole country.
Our current malaise is not the result – as an erstwhile minister might have argued – of breakneck economic growth. Nor is it the result of an unpredictable natural mishap, even if cyclone Idai disrupted supplies from Mozambique.
Government was warned as far back as 1996 that the electricity supply system needed to be expanded. This it ignored – something for which Thabo Mbeki would uncharacteristically apologise. In a rush to make up for this, Medupi and Kusile power stations were commissioned in 2007 and 2008 respectively. Initially budgeted at some R150 billion, they were to be completed and online by 2015. Years overdue, projected costs are now at put by the department of public enterprises at over R300 billion. Energy analyst Chris Yelland puts them at over R448 billion.
Well, that’s just money. Public enterprises minister Pravin Gordhan described them as ‘badly designed and badly constructed.’ They’re expensive and may not work so well anyway.
Developments within Eskom didn’t help matters. Boards and CEOs rotated in and out. Skills drifted off as staff numbers (and payroll) ballooned. Procurement was subject to questionable empowerment demands. And then there was the all-of-the-above of corruption and capture. Eskom, in the words of engineer and columnist Andrew Kenny, Eskom was turned into ‘an instrument of patronage and political engineering, with electricity supply of secondary importance.’
In other words, what we sit with was the entirely predictable consequence of a succession of poor choices, ideological obsessions and governance pathologies, both within the state and at Eskom.
And so it bleeds billions every day from the economy. Not to mention the threat it poses to business viability, particularly to small operators, and it dissuasive impact on investment. Load shedding is the perfect nightmare to loom over any pretensions of a ‘New Dawn’.
Meanwhile, probably the most prominent political issue in South Africa over the past year was the ‘land question’ – more accurately, the ruling party’s move in property rights through expropriation without compensation under the guise of land reform.
In this case, the ruling party – along with various allies – committed to amending the constitution to dilute property protections and specifically endorse the right of the state to take property without compensation (EWC). That compensation requirements had never been shown to be a significant hindrance to land reform, or that the Parliamentary consultation process demonstrated a hefty majority were opposed to doing so evidently, counted for little.
Neither would this do anything of note to address the real failings of land reform policy – poor project design, indifferent budgeting, corruption and so on – which even state-sponsored research has identified.
Perhaps no one has captured this better than former editor Brian Pottinger: ‘Having misplaced the order of importance on the national agenda, the government then compounded the fault by misunderstanding the nature of the transaction. Defining it as a racial transfer of land in terms of a policy of restitution undercut what the policy really should have been: a rational and modern land-reform programme based on sound economics, properly resourced and realistically targeted.’
In other words, policies on land have been made with greater regard to ideology than to practicality. There is an audible echo of the electricity crisis here.
And as just the failures of the electricity system are felt in the economy, so is EWC. As the respected economist Azar Jammine told the Financial Mail, this policy drive effectively cost South Africa the potential windfall that might have accompanied president Ramaphosa’s ascent to power.
It stands to do even more damage. The prospect of having investments seized at no compensation (or at an amount far below their worth) is a deeply concerning one for any businessperson, whether South African or foreign. We at the Institute of Race Relations have heard investors describe the country as ‘uninvestable’ on account of EWC.
This is backed up by as study conducted by Roelof Botha of the Gordon Institute of Business Science and Ilse Botha of the University of Johannesburg. Arguing that the mere ‘debate’ had inflicted damaged, they calculated that EWC as a policy – analysing it in light of experience elsewhere – the country could expect a debilitating recession, losing billions in foregone growth and investment, and as many as 2.2 million jobs over a two and a half year period.
Yet rather than changing course, the proposed course of action is to push aggressively on. At the core is a clamouring from greater state discretion and enhanced state control, to enable it to intrude ever more aggressively into private property. This is despite the fact that the state has shown little aptitude to make land reform work on its existing scale.
This raises the uncomfortable question as to whether the choices being made in respect of land and property rights will produce a crisis akin to that in our electricity system.
Would a reckless move on farmland destabilise agriculture so as to cripple production? This would not only be felt by consumers, but – given the contribution that agricultural products make to export earnings as well as the need for foreign exchange to pay for the import of staples – would soon manifest in an unresolvable balance of payments crisis. It’s difficult to imagine how the resulting economic strain could successfully be managed.
Before we dismiss this as alarmist conjecture, consider this: South Africa has had ample time to correct course on the country’s electricity system. Our leaders have made numerous soothing assurances about it. As deputy president, Ramaphosa assured Parliament and the country of the remedial actions that were in the works – all of which sounds jarringly similar to what is being said today. In 2016, Jacob Zuma confidently and emphatically claimed that South Africa would ‘never, ever, ever again’ experience load shedding.
Likewise, President Ramaphosa and his team have repeatedly tried to sanitise the import of EWC. It would not impact investment, for example, even though it already has. EWC will enhance property rights, although ominous indications arise that its endgame will be the elimination of private property in land. EWC will not target unproductive properties or undermine agriculture, but the ruling party in Northern Cape sets about identifying working farms that it intends to seize.
Load shedding today would then be matched by food shedding, and ultimately by an economic blackout from which South Africa would struggle to recover. The country failed to heed and act on warnings about the electricity crisis, even as it was upon us. We dare not repeat that mistake.
Terence Corrigan is a project manager at the Institute of Race Relations.