Is South Africa spiralling into the ambit of the IMF?

Eskom has the whole economy in a death spiral. Fixes, for instance getting all state employees to take a 10% salary cut, will be hugely unpopular and extremely difficult to implement politically. (Waldo Swiegers/Bloomberg/Getty)

Eskom has the whole economy in a death spiral. Fixes, for instance getting all state employees to take a 10% salary cut, will be hugely unpopular and extremely difficult to implement politically. (Waldo Swiegers/Bloomberg/Getty)

COMMENT

Another week has come and gone and those waiting for an Eskom plan are … still waiting.

Executive chair and chief executive for the next three months, Jabu Mabuza, reckons it has to successfully tackle, on an integrated basis, separating the utility into three entities, containing costs, addressing revenues (both through tariffs and getting municipalities to pay their bills), and restructuring debt. This all while the system remains fragile and under pressure.

Oh, and without pruning staff, as President Cyril Ramaphosa has ruled the power utility cannot reduce its headcount.

Outgoing chief executive Phakamani Hadebe was forthright, saying the utility is in a death spiral: as fast as it puts up prices to boost revenues, its customers switch to alternative energies or cut back their usage.

But a plan is nonetheless emerging. Treasury director general Dondo Mogajane calculates that R130-billion will have to be found to make up tax revenue shortfalls from an imploding economy with dramatically widening unemployment numbers, as well as to bail out Eskom, R49-billion this financial year and R56-billion the next.

One suggestion from Mogajane is for state employees to take a 10% pay cut to make up the deficit.
This would presumably include both Eskom’s employees and those from other state-owned enterprises: you could hardly ask other government employees to cut back while Eskom’s staff live large.

The economy, or lack of it, did feature at the recent four-day meeting of the national executive council (NEC) of the ANC, and Ramaphosa is understood to have noted that government’s wage bill constitutes 47% of spending.

But the NEC is currently too consumed with factional and proxy battles to provide real leadership on how to get out of the present crisis.

This is not to say that the current challenges are easy. Eskom has the whole economy in a death spiral. Fixes, for instance getting all state employees to take a 10% salary cut, will be hugely unpopular and extremely difficult to implement politically.

But as we hurtle towards credit downgrades with their concomitant capital outflows and run out of fiscal space, we move inexorably into the ambit of an institution that will do the job we apparently are unable to do.

Will it be left to the International Monetary Fund to do what we cannot do ourselves?

Kevin Davie

Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote. Read more from Kevin Davie

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