Politics, economics and Eskom blamed for bad mood
May 07 2008 01:13:56:240PM  - (SA)  
Andy Galloway

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That’s the opinion op JP Landman of the BOE Investment Research Team who recently released an article entitled “Is the bad mood justified?”

The article has been reproduced by Brent Wilson of the ITInews Editor webpage.

Landman says the mood in the country, certainly amongst white people, is quite depressed. An annual opinion poll on how optimistic South Africans are, found that in February 2008 60% of South Africans felt positive.

That was down from an average of mid-sixties in previous years. The real outliers were whites; only 31% were optimistic, down from the mid-forties in previous years.

The poll reveals that Cape Town has the least positive residents (49%); the Vaal triangle has the most optimistic (74%); Pretoria and Johannesburg come in at 62% and 67% (interesting if one considers the crime in Gauteng); young people are more optimistic than their elders (66% vs 51%); and the inland areas of SA are more optimistic than the coastal areas.

This is probably explained by the fact that optimism amongst coloureds and Indians is fairly low (40% and 44% respectively) whilst blacks are very optimistic, Landman says.

Why such a bad mood? In the previous years this poll was conducted crime and malfunctioning municipalities were already a daily reality.

“So it cannot be that. In my opinion three factors have contributed: politics, economics and Eskom,” he says.

Landman goes on to say that politics – particularly the post-Polokwane reaction to ANC elections and decisions about the media, the Scorpions and the judiciary; economic headwinds, particularly rising petrol and food prices which also push up inflation and interest rates and depress general activity; and the most damaging – Eskom’s inability to supply sufficient power.

“Eskom is the straw that broke the camel’s back. It brought up all the subliminal fears that whites have about black governance.

“Never mind the fact that in the mid-seventies Eskom had a similar crisis when the whole country was without power for 18 hours and power tariffs rose by 75% to fix the problem,” he says.

Somehow the current Eskom crisis is seen as the beginning of the end.

At the heart of the Eskom problem is a lack of investment and maintenance. Is that being fixed?

Last year Eskom invested R17.7 billion, 67% more than the previous year. This year it will spend R46 billion and next year R80 billion. By 2012 it would have spent R360 billion.

It will take time for these investments to work through; 2012 means another four years of pain and interruptions, he says.

“This investment story repeats itself all over the SA economy. Transnet is investing R78 billion over five years; about R12 billion a year are being spent on roads, and toll roads will add to that amount; municipalities are budgeted to spend R100 billion over three years on infrastructure.

“Comfortably more than 90% of these budgets are actually spent. All the public attention fell on the R4 billion not spent (3%), very little on the R124 billion actually spent.

“There are some rather questionable decisions from Polokwane, notably on the media, judiciary and the Scorpions, but not on economics and welfare policies.

“There are budgets and business plans around capex, political decisions backing it and a rising numbers of people benefiting from it. I think the investment programme is sustainable,” says Landman.

Even if we accept lower economic growth over the next few years, say 4% rather than the 5% we enjoyed the last few years, the beauty of SA is that per capita incomes will still rise and at an accelerating rate.

“In the fourteen years since democracy, per capita incomes have increased by 26%. At 4% growth for the next seven years to 2014, per capita incomes can again increase by 26%! In a year or two interest rates will ease, there will be scope to do tax cuts and per capita incomes will continue to increase.

“The basics have not changed. For me the most important pre-condition of progress is sustained rising per capita incomes.

“In the late nineties SA had a low growth crisis; a 1% economy that looked as if it could not break through a 3% growth ceiling. And now growth is sufficient to lift per capita incomes quicker than Australia, Brazil, Germany, France, Italy, the UK and US. The country responded successfully to the challenge of low growth.

“All that remains now is to put one foot in front of the other, carry on and expect a lot of messiness. Sometimes I think it is our inability to live with messiness that paralyses us.

“If we can make this paradigm shift their mood might not be so bleak. More importantly, we can capitalise on the opportunities,” he says.

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