How to throttle an industrial hub
Harrismith officials, beset by ineptitude, turn down private help
● The CEO of the Harrismith Business Forum, Ben Deysel, says finance minister Tito Mboweni’s call this week for closer publicprivate partnerships could save one of the country’s most important industrial hubs.
Harrismith has been battered by a lack of service delivery and electricity cuts since 2011 because the municipality owes Eskom R2.6bn. On Monday, the business forum sought a high court order to stop Eskom cutting the supply altogether.
Deysel says the crisis could have been avoided but the Maluti-a-Phofung municipality in the Free State rejected all offers of help.
“The private sector has been knocking on the door for many years to say let’s take hands and work together,” he says.
But the council refused to meet them. “The only time we saw municipal officials was when they came and begged us to prepay for our power so that they can pay salaries.”
And so he was “very encouraged” by Mboweni’s words.
“If we can just put those words into action, that’s the bottom line. But it’s a huge encouragement and certainly a new mindset from the new minister.”
The court gave the business forum two months to negotiate with the government and Eskom to find a sustainable solution to keep the lights on, which if at all possible should be done through the municipality.
But Deysel says they “flatly decline the suggestion that we use the municipality. We will not go back to paying them for electricity because that money will simply disappear again.”
He says contracting a professional thirdparty operator to collect the revenue and pay it to Eskom is the only sustainable solution.
“At the municipality there is absolutely no skill, no capacity. The current system is falling apart.”
It is a regular occurrence for electricity to be switched off for anything from four hours to three or four days. When this happens the water pumps stop, the town is without water and sewage runs down the streets, he says.
“It’s a desperate situation at the moment, exceptionally difficult for businesses to operate in, and also very costly.”
Companies — which include Nestlé, packaging business Boxmore Plastics, Nouwens Carpets, Bergview One Stop, school jersey manufacturers, office furniture designers, his own company Highway Property Group, which runs the top-rated truck stop in the country, Shoprite Checkers, Busamed private hospital and maize manufacturers Afgri Milling — have invested millions in additional power-generating capacity, but electricity cuts are still ruinous.
The cost of production is four times higher when companies use generators rather than normal electricity.
Big businesses are surviving but at a huge cost, which makes it hard for them to remain competitive internationally.
“It makes us very reluctant to invest in extending or expanding our capacity.”
For smaller businesses that don’t have the spares and have to get outside contractors from Bethlehem or Bloemfontein to come and do the repairs when a cable or transmission box blows up, and often have to shut down entirely until the power returns, it’s been a fight for survival and many haven’t made it.
“The power cuts have cost many jobs and lots of income for employees who had to be laid off without pay for the period of the blackout.”
As production suffers and costs increase — “a small business is spending R2m on generating equipment and R400,000 a month on diesel” — companies downsize and retrench, which has a devastating impact on township residents, who mostly depend on small businesses for jobs.
“The townships are desperate for jobs, for investment, but it’s not coming.
Businesses just will not invest until municipal dysfunctionality is resolved
Ben Deysel
CEO of the Harrismith Business Forum
“Businesses just will not invest until municipal dysfunctionality is resolved.”
Deysel says as long as the department of co-operative governance & traditional affairs insists that the municipality should handle the payments to Eskom, a solution to the payment crisis is unlikely.
“There is no chance they can upskill or capacitate the municipality.”
The only sustainable solution is for a professional third party to manage the payments, and he is not entirely hopeful that the government will allow it, in spite of Mboweni’s brave words.
“It all depends on the political will, because it will certainly cost some jobs in the municipality, and will require private-sector involvement in managing it going forward. And it will cost the municipality a revenue stream.”
As he sees it, there is no alternative. He says he has been telling successive ministers for years that the municipality was “not viable”, but after vague promises to address the issue nothing ever happened.
Repeated requests to place it under administration were blocked by the then premier Ace Magashule. Although this has now happened, the situation remains dire.
Deysel says at least the new minister of co-operative governance, Zweli Mkhize, is talking to the business sector.
The former mayor, Vusi Tshabalala, who was finally dumped after lording it over the municipality for five years, refused to meet with the business sector or involve it.
“They wanted us to prepay for electricity so that they could pay themselves salaries, but from a mutual solution-finding process and being actively involved in helping manage affairs, we’ve just met with total ignorance and refusal.”
The private sector offered financial management skills, engineers, accountants and consultants free of charge, but were refused.
“We were just told the council will manage its own affairs. It was a closed ring of criminals, that’s the only way I can describe it,” says Deysel.
The Harrismith Business Forum was started 12 years ago to facilitate private-sector assistance to the municipality.
They had a “very close working relationship” with the previous municipal manager and his staff.
“Then Magashule moved them out and brought his own people in and the municipality started sinking. They took everything into their own hands and excluded us from everything.
“Now its key focus is generating enough money to pay salaries to their staff. That needs to be sorted out because they’re totally overstaffed, and under-capacitated.”
Without private-sector involvement the crisis will worsen, he says.
This is why he hopes ministers were listening carefully to Mboweni.