Facing economic disaster, we’re still in the dark about Cyril’s ‘reform’

Facing economic disaster, we’re still in the dark about Cyril’s ‘reform’

Are some countries simply unreformable?

This bleak, pre-festive season thought occurs just as Eskom, in the guise of the movie villain The Grinch who Stole Christmas,  plunges the country once again into December darkness.

Before interrogating some of the known facts hobbling Megawatt Park, it is quite unknown if Cyril Ramaphosa is a serious reformer, ready to sweep away the massive constraints and vested interests and sclerotic practices which have plunged us again into darkness and which could see the entire economy fall over the proverbial cliff.

Veteran Johannesburg stockbroker (and jogger) David Shapiro doesn’t think he is. Over the weekend he noted, acidly: “It’s bad enough the JSE has fallen off a cliff, but having to spend the weekend in darkness only adds to my stress levels. Don’t worry, business leaders, the press and the Clifton Beach crew tell me, Cyril (and the New Dawn ANC) will rescue us. I have more chance of running to the moon.”

Last Sunday evening I witnessed certain business leaders and the media (and perhaps some members of the “Clifton Beach crew”, whomever they might be) pay homage to Ramaphosa and some key lieutenants. The event, organised by the SA Jewish Board of Deputies, was more a love-fest than an evening of critical engagement.

I suppose if the balls you are bowled are delivered underarm then it is easy to bat them beyond the boundary line. This Ramaphosa did with charm and ease, in response to  questions posed to him by Investec supremo Stephen Kosseff.

Anyway, it was a case of messenger trumping the message.

Eskom – other than an assurance that all state-owned enterprises were being “reformed” – did not feature strongly in the discussion. But the audience hungered for hope and the reassurance. Ramaphosa can say little of substance in such a confident manner that he inspires, at least, the prospect of a less-worse outcome.

The audience that night lapped it up, but left the glitzy event with no fundamental prospectus in sight for the urgent reforms and transcending changes the country needs to right-size the listing ship of state.

Ramaphosa equivocates about a menu of real reform or, much worse, lacks the guts to downsize the Eskom staff. It  has ballooned from about 32,000 in 2007 to 48,000 in 2017, and the cost per employee has risen fourfold while debt, securities and borrowing  has metastasised from R40bn to R355bn in the same period. The utility also brings in less revenue today than it did a decade ago, many customers having gone off-grid and low demand from a recession-wracked industry piling on its woes.

Business Day editor Lukanyo Mnyanda noted on Monday how virulently this pathology of easy-talk-minus-hard-action spreads. He wrote that the “new dawn” SABC board got the message on reform and has set about taking “drastic measures” required to turn the R1.5bn loss-bleeding state broadcaster into a financially viable vehicle.

This included the unsurprising item of “cutting staff numbers”. But the SABC board obviously missed the cue that “reform yes; but at no cost to our voter and union support”.

Thus, as Mnyanda notes, instead of backing from the government which promised reform, the board has met unremitting hostility from it. The new minister of communications, Stella Mdabeni Abrahams, is apparently “at war” with the broadcaster, and “refuses to engage with it” due to the retrenchment suggestion. Small wonder, then, that three of its directors have apparently resigned.

The Democratic Alliance (DA) at a national level, and from the opposition benches, demands painful and real reforms at Eskom and the SABC. It calls out Ramaphosa, regularly, for his half-baked approach to economic and labour market corrections. Its finance team draws quick attention to the government’s own “fiscal risk statement” contained in the 2018 Medium Term Budget Policy Statement.

In plain terms, this national treasury document, in an appendix on “compensation data” notes that salaries and benefits of public servants now gobbles “58.1% of current spending” and increases in the number of  the higher-paid employees (those earning in excess of R30,000 per month) has risen fivefold since 2006/7.

On the government side, finance minister Tito Mboweni stands – seemingly alone – in drawing the obvious conclusion of just how unsustainable, for the nation’s solvency, these statistics are, and what dire risk they pose to the future.

These figures exclude the disastrous metrics at state-owned entities which occupy pole position in the “fiscal risk” stakes, where the government’s “guarantee portfolio” totals R670bn. And our friends at Eskom, for delivering more or less the same amount of electricity and sales between 2007 and 2017, have seen costs per employee rise in the same period from R9,451, on average, to R33,178, per head today.

These facts and figures form the basis for the sensible reform proposals from the official opposition at a national level.

But as Tony Blair once observed, the difference between opposition and governing is the distinction between saying and doing.

And where the DA actually governs, locally, a starkly different picture emerges, certainly not redolent of the tough reduction diet it demands of a bloated government.

When the EFF is not trashing Vodacom stores or “slitting the throat of whiteness” or faking accusations against Pravin Gordhan, it occasionally offers a justification for the odd fact that the DA has managed to install its mayors in Johannesburg and Tshwane only with the support of the Red Berets.

Deputy president of the EFF Floyd Shivambu might be less than candid on how and where the looted VBS Bank millions went, but he did offer candour on why his party, to date anyway, keeps DA mayors Herman Mashaba and Solly Msimanga in office.

Very recently, Shivambu explained to an audience in Durban that “Mashaba had succumbed to EFF threats to vote him out by agreeing to insource ordinary workers of the municipality”. This in turn meant, he explained, that the average salary improved from R2,100 per month to R7,000 plus the benefits of medical aid and a provident fund. Quite how this is to be afforded without loss to essential municipal services elsewhere was not explained.

In Pretoria, very similarly, according to him: “The EFF withdrew its motion of no confidence in (Solly Msimanga)  after he had also agreed to terminate outsourced security guards … who are going to be insourced and to be paid no less than R8,000.”

Assuming, in this case, Shivambu is credible, you have two cases of the DA, locally, implementing national EFF labour policy.

And while for each individual security guard a good case could be made for an improvement, just replicate this across the entire municipality, with tens of  thousands of workers, and the local figures of the solvent municipalities will soon enough run with as much red ink as the national picture reflected in the treasury statement .

Only a tough reckoning can edge SA away from the cliff face of economic disaster. That means both government and opposition must offer an honest vision of the limits on current expenditure. Someone needs to stand up and explain how government simply cannot, with all its other core functions under stress, be the employer of first call and of last resort.

But such honesty and candour is unlikely here before an election. And it must be open to question whether any change in our descent to fiscal ruin will happen afterward. But spare a thought for another leader.

French President Emmanuel Macron does have an unambiguous change agenda and just 18 months ago received a ringing mandate to implement his vision of a revitalised nation, including reform of the labour market and restoring the country’s competitive thrust.

But last weekend he rushed home from Argentina, another country with a reformist president under siege, to inspect the most storied and visible of all French symbols: the Arc de Triomphe in Paris.

Its 19th-century splendour had been seriously defaced and damaged by very 21st century demonstrators. They protest against recent fuel levy increases and associated living cost rises. Apparently (since the so-called yellow vest protests are leaderless it is hard to be definitive) they are repelled by the reformist-“pro rich” metropolitanism of their young president.

France, SA, Argentina. Different countries, different presidents, different problems. But a very similar disinclination in these countries to meet the challenges these changing times demand. And how costly to political careers necessary reforms can be.

Leon, a former leader of the opposition, now chairs Resolve Communications and is a senior adviser to K2 Intelligence of London.
@TonyLeonSA.

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By |2018-12-05T08:59:15+00:00December 5th, 2018|Cyril Ramaphosa, Eskom, Uncategorized|0 Comments

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