Eskom has cost SA R400bn in lost wealth, thousands of jobs

Alec Hogg.
Alec Hogg.

Hello.  I’m Alec Hogg and this is the Rational Perspective.

Eskom is a name that’s on many people’s lips in South Africa because the power utility, once regarded as one of the most admired on earth, is now showing to be increasingly dysfunctional.  The Chairperson is out.  The chief executive was suspended

We have an acting CEO, and ‘acting’ people in various other positions, and it appears as though stability is the last thing that Eskom’s able to achieve at the moment.  The politicians are in there. They have their own war room.  They now appear to know better (they believe) than the experts.

Well, whatever the case is; right now we are in a situation where Eskom’s mismanagement, by government primarily has led to a situation where the South African economy is ten percent smaller than it would have been had the politicians allowed Eskom to do its investment seven years ago.

Dawie Roodt, who is an economist, has done the calculations.  He says that this year, the economy would have grown at three percent rather than the two percent that is projected, so one-third of economic growth being wiped out by the problems of power supply shortages. 

He says that if you take that back over seven years, the cost is about ten percent to the economy.  Now, South Africa is a USD350bn economy.  Translated into Rand terms – R4trn.  Ten percent of that is R400bn.  If you consider how many thousands, if not hundreds of thousands of jobs would have been created if that additional wealth had been created in the economy. 

It beggars belief, what mismanagement can do to a country’s economic potential.

Is there a way that this could have been avoided?  Most definitely.  The South African Government believes in a developmental state, which means that it believes its bureaucrats know better than the market system/market forces. 

It has a ‘command and control’ centrist economic philosophy and here we see the direct impact of it.  One wonders how long it will take…how much more load shedding, how much more bureaucratic bungling before the reality of Adam Smith’s Invisible Hand comes into the consciousness of those who are leading this wonderful country.

This is Alec Hogg with the Rational Perspective.

* For more in-depth business news, visitbiznews.com or simply sign up for the daily newsletter.

ZAR/USD
16.31
(-1.23)
ZAR/GBP
21.09
(-0.61)
ZAR/EUR
19.33
(-0.99)
ZAR/AUD
11.90
(-0.72)
ZAR/JPY
0.16
(-1.15)
Gold
1949.88
(+0.16)
Silver
26.78
(-0.87)
Platinum
929.00
(-0.32)
Brent Crude
43.78
(+2.41)
Palladium
2358.07
(+1.96)
All Share
54673.65
(-0.66)
Top 40
50399.16
(-0.59)
Financial 15
9841.32
(-2.14)
Industrial 25
72558.00
(-1.08)
Resource 10
55438.10
(+0.58)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1291 votes
It depends on how the funds are used.
73% - 8603 votes
No. We should have gotten the loan elsewhere.
16% - 1893 votes
Vote