I have painstakingly looked for something positive to extract from the State of the Nation Address (Sona) delivered by President Cyril Ramaphosa last Thursday.
I did however welcome his admission that “the recovery of our economy has stalled as persistent energy shortages have disrupted businesses and people’s lives”.
South Africa’s energy crisis has me thinking about the term ‘time preference’, mostly used in economic literature to mean the present is preferred over the future. It has a double and counterfactual meaning – the first being that if you prefer the present, you will spend money to indulge your desires with little care about the future; the second being that if you prefer the future, you will starve your desires and save money for the future so you can indulge later.
By the same token, the incessancy of load shedding, the crisis mode and the several failed plans to solve it, make me wonder if the present situation is better than the future may be, or will the future be worse?
Lack of conviction
The president spent a lot of time talking about Eskom in his address, but he didn’t have the conviction of a man who is on top of the crisis. Certainly, the International Monetary Fund and rating agencies didn’t think so; of all factors that could lead to a further economic downgrade, Eskom currently poses the highest risk.
To restore confidence – not just for agencies and international organisations, but more importantly for the business sector – government (and by that I mean National Treasury) must show what it can decisively do if the handicaps are removed….specifically, the handicaps that seek to represent a party’s position in relation to how Treasury must operate and take action.
This year is it. A year that might show whether the decision on Eskom and most state-owned entities is informed by preference of the present over the future.
The energy crisis and other issues such as the uncertainty surrounding the national health insurance, the ongoing contestation of the mining regulatory framework and the behind-schedule infrastructure plans (such as the building of dams) has reduced the country to a point of advancing stagnation.
SA is punching well below its diminishing real potential.
Together, these elements have arguably made any economic recovery aspirant because the insufficiency of the touted solutions to them is glaring and made unworkable by party politics.
The behaviour and the utterances of politicians from all parties during and after Sona revealed parliament as the latest playhouse, filled with an elite who have no care about the future.
Expectedly, many limited understandings about economics and the role it plays in moving a country forward emerged.
The world economy does not wait for a country, and a country seldom recovers from opportunity cost.
The recent state visit by German Chancellor Angela Merkel gave us a glimpse into what the German private sector thinks of SA. To them, their investment in the country hinges on the solving of the energy crisis. German multinationals with operations here are not announcing anything beyond what had already been planned. Any plans to expand operations were already in place. To assume they are new indicates a lack of awareness.
It doesn’t matter how many pacts or promises we make, unless there is tangible evidence of stability in power generation, they simply will not invest. Would you?
Among the problems South Africa has is a political elite that is frightened by the idea of no longer being in government.
They prefer the present – where they are important, have assured income and perks, and are assured of pension for the future. For them, the present is the ideal time. They prefer it over the future because their time will be done and who will remember them then?
The real motives
As democracy matures, it has become clear that the real motives of the government class at present – including the past 10 years – are not focused on providing stimulus to the economy. It has been purely about indulgence, in particular the transferring (looting) of future resources to the present (by facilitating state capture) and saying ‘We don’t care about the future, let them starve’ because many won’t be there.
Moreover, there is the angering notion that many will not be called to account.
The incessancy of load shedding is the ‘it’ moment for Treasury with regards to the coming budget speech – and for anyone in government who prefers the future to act. For Finance Minister Tito Mboweni, this, then, is the chance to take a powerful decision, one that might have negative political outcomes for him.
Doing nothing does more harm because it signals a preference for the present indulgence and a future of starvation or total economic collapse.