President Cyril Ramaphosa. (Jeffrey Abrahams, Gallo Images, file)
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Good advice is simple; damn the torpedoes, full steam ahead! There is too much at risk for Eskom to sustain warm bodies, however skilled they may be, if they are not needed at the utility, writes Thembinkosi Gcoyi.
Since his election to the presidency of the ANC in December 2017, President Cyril Ramaphosa has been telling all who care to listen about the deep-rooted structural problems facing the country. From a sluggish economy, to the outright ruination of South African institutions, he has held nothing back in talking about the havoc that has been wrecked on the country.
The numbers on the jobs front have been telling a similar story, with unemployment jumping to 27% in early 2019, with a daunting 54% of youth unemployment.
In the midst of all the gloom, Ramaphosa has also been consistent in his narrative that things can and will be turned around. Over the last few months, there have been glimmers of hope that indeed, his rhetoric and focus on restoring the credibility of the South African state is beginning to bear fruit.
Quite refreshingly, the economy grew by 3.1% in the second quarter of 2019, reversing the painful contraction by the same number in the first quarter of the same. News is also starting to come out that foreign direct investment (FDI) is picking up, with 2018 being the strongest performance yet since 2015. Recorded FDI came in at R70.7bn.
The president attended the launch of the Mara Smart Phone Factory in Durban, a pledge made at his Investment Summit in 2018. Toyota is investing R457m to expand its production of the Hi-Ace. South Africa's overall ranking on the World Economic Forum's Global Competitiveness Index has improved from 67 in 2018 to 60 out 141 nations in 2019. Things are beginning to turn.
However, just when we were getting ready to pop the Champagne, in comes Eskom with a round of unexpected power cuts last week. This time the blame fell on a conveyor belt and other gizmos that support the functioning of a high-tech power station.
You cannot blame Ramaphosa for this. However, Eskom is a festering sore for South Africa's economy and its turnaround is vital for the country's economic wellbeing.
The company's turnaround has been a core focus of the president and his team since he took office in February 2018. Dedicated teams of specialists and highly accomplished brains have been put on the task of ensuring the company can competently do the thing that it exists for; delivery of stable electricity for households and industry.
Regrettably all interventions thus far seem to be struggling to gain the required traction. South Africa is now at risk of being junked by Moody's Investor Services because, as Ramaphosa has clearly said, Eskom is too big to fail and the company seems chronically addicted to state support. Its R450bn debt is a major albatross around the neck of government and effectively, this debt is owed by the fiscus, for better or worse.
The debilitating consequence of Eskom's mishaps is that it saps the confidence that is beginning to creep into the business climate and undermines the investment story of South Africa.
Ministers Tito Mboweni and Pravin Gordhan are working hard to support the company's turn-around. South Africans have been promised a strategy paper which will outline its proposed reforms. The Eskom strategy paper will likely be a polarising affair that will pit government against all interested parties. There will probably be something for everybody but not enough for everyone. That will be a good outcome given the balance of power between government, labour, business and communities.
President Ramaphosa will be careful not to offend or over-extend himself on labour, given the strong bargaining power that it holds within the tripartite alliance. He will not want to go the way of President Thabo Mbeki who still gets insulted for instituting the so-called "1996 Class Project".
Good money is on the president treading softly to manage the anger that will inevitably accompany any possibility of job losses at Eskom. Good advice is simple; damn the torpedoes, full steam ahead! There is too much at risk for Eskom to sustain warm bodies, however skilled they may be, if they are not needed at the utility. That may sound callous, but it is an unavoidable reality that Eskom needs to trim its bloated staff if it is to have any chance of staying afloat, and the rest of the country along with it.
Despite the headache that is Eskom, it is inevitable that South Africa will overcome the challenges it is facing. We just need more green shoots than reversals in the short term. The next investment summit in November 2019 will be another opportunity to recalibrate the machine and build on the narrative of reform which has taken hold of the public agenda. South Africans must support this to the hilt.
- Thembinkosi Gcoyi is the managing director of Frontline Africa Advisory. Follow him on Twitter: @tgcoyi
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