Hard work, patience for the long road ahead

As I was sitting eating breakfast in Misty Cliffs this past week, a huge sea otter galumphed across the beach in search of the best place to dive in and fish. Surfers spent hours trying to catch the right wave.

Elsewhere in the country it seems people are ready to abandon all patience with an election in the offing or when things get tough. The election, in particular, continues to force a maddening of the rhetoric. Calls to ensure that the lights aren’t switched off in favour of the energy transition are dog whistles from Dubai with an election approaching when everyone knows that we are on a very slow and steady path of decommissioning in SA.

There is some room to run plants harder for a little longer but broadly we are within a contracting envelope to 2050 net zero with time and space to get things right (in particular on the socioeconomic justice front).

Alarm bells were rung in the past week over an apparent slower pace of electricity reforms. Yet we cannot expect a big bang decision, such as the 100MW licensing threshold, every six weeks.

Reforms are in an exceptionally difficult period of hard work on things like aligning wheeling and feed-in tariffs, and designing and rolling out transmission financing modalities.

The electricity minister of course — perhaps the definition of impatience — has not helped things with his weekly media conferences, and so we get grasping at straws and excitement over microgenerators from China. (Quite what one is meant to do with these is still not answered. Do you plug a life-support machine in a hospital into it and put the generator next to the bed?)

Yet the data is clear. With about 2.5GW of roof-top solar added in 2023 and progress on utility-scale private projects that will largely come on stream in 2024 (seen in the import data), a substantive end to loadshedding (which means below about stages 2 or 3 on average) through the end of 2024 is still possible. Though the tail to actually end load-shedding after that is still long and at risk given the collapse in the IPP office and its ability to regularise utility-scale Eskom offtake procurement of generation and batteries. (The muchtrumpeted announcement of preferred bidders for battery bid window 1 does not overcome it being so late.)

We are going to need more patience on things like reform legislation. Parliament is already stuffed with so many important bills. Last week’s cabinet meeting added a slew, while this week’s special additional cabinet meeting will add more.

With parliament likely to take a three-month election holiday from mid-March, there are few sitting days left and some patience will be needed to see much of this processed in the second half of this year and enacted even into 2025.

All this seems rather mad. This parliament has had five years to work through things, and shows the mind-numbing ineptitude of its leadership to actually view it as an engine of reform and change.

Things do seem, apparently, to be changing under the new head of government business, who is giving the caucus a kick up the backside — in particular on things like the Electricity Regulation Amendment Bill. However, this serves only to highlight the lost years under his predecessor in parliament.

Patience was very much a virtue — inside parliament and outside — in the past five years as various crazy ideas burnt out. Extreme variants of expropriation without compensation, capture-motivated Reserve Bank nationalisation and so on all came and went, so did unworkable department of trade, industry & competition daydreams of codified localisation targets.

Patience is still needed to see out the unworkable current version of National Health Insurance, which is impossible to implement and to fund. If the legislation is passed in the coming days, it will do its job as an election flag and then fade.

Patience, however, doesn’t mean inactivity. Indeed, the problem is often that to find the various destructive policy moves or to see through reform changes the people involved need nerves of steel and great patience. These are perhaps qualities we need to consider more when we talk about public sector capacitation and strengthening.

MISSING THE MARK

There is always something else. The new State-Owned Enterprises Holding Company Bill is just one of them. Even after forthcoming cosmetic changes it risks entirely missing the mark and instead its proponents must resort to lazy assumptions that those against the bill somehow disagree with the aims of a better-governed SOE sector.

Where serious patience really is needed now is on logistics. The reforms are hard, long and deep and even if everything goes to plan (per the forthcoming road map) will take five years or so — a whole political cycle — to actually bed in and boost GDP.

In the interim things are getting worse operationally before they get better. Like load-shedding before, it is unsurprising to see the shock of many politicians at the fact that Transnet is getting worse in real time when the industry has called this out for so long and it has been painfully obvious from the actual data.

A guarantee now extended is positive in that it will again allow the Treasury as the grown-ups in the room to extend conditions aligned with sector-wide reforms (it is still news to many that Transnet is not the logistics sector in totality) and solutions for problems of liquidity and access to market. However, it does not solve a solvency problem, which will rear its head again very soon.

As with energy reform, patience for a long road ahead is needed. There will be quiet patches as deeply challenging and complex structural reforms are slowly edged forward. There will be noisy pushback and two steps back to take two-and-ahalf steps forward. All this, of course, over an election period. But the dire state of the industry will still be there — or worse — after elections.

Perhaps calling for patience is a reaction to those who have found me on my meeting circuit to be rather too positive; perhaps it’s patronising. Indeed, telling the huge stock of unemployed to be patient is blatantly nonsensical and the reforms to electricity and logistics will only create the minimally sufficient conditions for nibbling away at some but hardly all unemployment.

This is why we need to supercharge sector structural reform with other employment interventions. Patience and a little optimism through the madnesses doesn’t ignore that there are deep risks and negative outcomes still being produced.

Yet when you leave reforms this late, there is little choice. And you need to stay the course rather than pack it all in when inevitable bumps occur. This is perhaps the key lesson to gird oneself with after the elections.

There is no low-hanging fruit, only hard work. Any party selling easy fixes is deluding voters. Bond yields are set for a long ride ahead. Are you?

Attard Montalto leads on political economy, markets and the just energy transition at Krutham (formerly known as Intellidex), an SA research-led consulting company.