At last, an Eskom light-bulb mo­ment

Sunday Times - - Business Opinion & Bits - By Hi­lary Joffe

Was the bet­ter-than-ex­pected eco­nomic growth num­ber in the third quar­ter a tem­po­rary bounce or the start of a re­cov­ery? There’s cer­tainly a lot to re­cover from. Growth over the past five years has av­er­aged hardly more than 1%, well be­low the pop­u­la­tion growth rate of 1.6%-1.7%, so, on av­er­age, liv­ing stan­dards in SA have gone sharply back­wards. Nor do the third-quar­ter growth fig­ures in­di­cate the econ­omy is about to shoot the lights out any time soon. Af­ter two neg­a­tive quar­ters, it bounced back with a 2.2% pos­i­tive quar­terly num­ber — that is, com­par­ing the third quar­ter with the sec­ond. Com­pare the first nine months of this year with the first nine months of last year, how­ever, and growth was just 0.8%, in­di­cat­ing the full-year 2018 growth out­come will be be­low 1% and economists, sadly, are just quib­bling about the dec­i­mal points.

Even the op­ti­mistic economists don’t ex­pect much more than 2% next year. But that as­sumes not only that volatile sec­tors such as agri­cul­ture don’t turn neg­a­tive again but also, cru­cially, that the much-needed in­vest­ment and in­vestor con­fi­dence that Pres­i­dent Cyril Ramaphosa has been so avidly court­ing starts to come through.

The signs are not great: in­vest­ment spend­ing was again sharply neg­a­tive in the third quar­ter and has now been in the red for 10 of the past 12 quar­ters. And though Ramaphosa’s re­cent in­vest­ment con­fer­ence may have elicited R290bn of prom­ises, it’s hard to see how any cor­po­rate board is go­ing to give the go-ahead to start spend­ing that money if SA can’t guar­an­tee a re­li­able sup­ply of power. On one es­ti­mate, the many months of load-shed­ding in 2014/2015 shaved as much as one per­cent­age point off the eco­nomic growth rate and the al­most daily stage two load-shed­ding of re­cent weeks has been much more akin to the 2014/2015 episode than to the 2008 power cri­sis, which was brought un­der con­trol quite quickly.

But Eskom now is in worse shape than it was a decade ago, and the risk of a total sys­tem crash is surely higher. Pub­lic en­ter­prises minister Pravin Gord­han re­vealed at a hastily called me­dia brief­ing this week that, be­cause so much of the power sta­tion fleet has bro­ken down, there is an “en­ergy avail­abil­ity fac­tor” far be­low 70%. None of the Eskom old hands can re­mem­ber a time when it was this bad.

At least Gord­han and Eskom chair Jabu Mabuza have now re­sponded to the threat posed by the op­er­a­tional cri­sis at Eskom, but it’s taken them a while.

What was strik­ing, too, about Gord­han’s easy English ex­pla­na­tion this week was that, by his own ad­mis­sion, this was all new knowl­edge. But the is­sues — main­te­nance, coal, diesel — are not new at all. The same cul­prits have long been blamed, with a cou­ple of ad­di­tions such as the ad­mis­sion that the prob­lem was not so much a lack of main­te­nance as main­te­nance poorly done, and the rev­e­la­tion that the new power sta­tion units are not pro­duc­ing the megawatts they should be (blame the sup­pli­ers).

Not that it’s not all true. But Eskom has been hob­bling along un­der these con­straints for many years — and when the lights go out it’s not a main­te­nance or a money prob­lem: it’s a man­age­ment prob­lem and one of lead­er­ship.

Gord­han and Mabuza are at last en­gag­ing with the com­plex re­al­i­ties of Eskom’s ail­ing op­er­a­tions and promis­ing to fix what’s bro­ken. They are hardly the first to give it a try, but if SA is to get growth and in­vest­ment, we will have to hope they suc­ceed.

It’s a man­age­ment prob­lem and one of lead­er­ship

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