Editorial: The stink is killing us
The rotten stench of corruption now contaminates everyone and everything associated with the person of President Jacob Zuma, including parts of the state, the ruling party and people with their hands on the levers of financial power.
In the case of corruption-plagued Eskom, the country’s largest state-owned enterprise, it has not been able to auction its bonds publicly for nearly two years, and it has had to raise money from private, off-market placements. But all the public gets to know about is its never-ending tariff hikes, with a mooted new increase to municipalities of 27%. Eskom sucks more and more and gives less and less.
Expert observers see the power utility as being in a death spiral. Electricity is too expensive for wealthy industrial users and relatively poor township residents. Businesses and consumers are making alternative arrangements for electricity or not using it at all.
Eskom needs higher tariffs to cover lower sales and, if the #GuptaLeaks emails are to be believed, to fund eye-popping deals with Zuma’s friends. The Public Affairs Research Institute report, Betrayal of the Promise: How the Nation is Being Stolen, suggests that as much as R10-billion may have flowed offshore from Gupta companies in South Africa.
Notwithstanding the stench, there has been some economic resilience that has mitigated the worst of what Zuma has been doing to us. Emerging markets are back in favour with investors, who have been seeking higher yields. The bountiful rains in much of the country have produced all-time record maize crops and commodity prices have shown significant recoveries. Both agriculture and mining showed renewed strength in the first quarter of this year, growing by 22.2% and 12.8% respectively.
Otherwise, the economic news could not have be worse. Economists had predicted growth of 0.9%, but a second quarter of negative growth in a row means we are in recession.
The reason for the contraction is clear: the consumer is beaten and is battening down the hatches for who knows how long to weather the fierce political winter now upon us. The resilience of South Africans has been shown by people of all hues and political persuasions standing shoulder to shoulder to express their disgust with what Zuma has done to the democratic project.
They will be reining in spending until they see a brighter political outcome. In fact, the threat of a death spiral applies not only to Eskom but also to the economy as whole.