Zuma's Explanation on Eskom to Investors at Davos

President Jacob Zuma has explained the failure of Eskom to supply electricity to South Africa by pointing out that the electrical infrastructure of South Africa was never designed to supply electricity to eleven million households.

That is quite an admission, coming from a man who is notorious for making promises that he cannot keep and probably never intended to keep.  What it says is that the ANC, which ‘has a good story to tell’, failed to understand that electricity, and power generation in general, is one of the markers of development of any country.  He explained to the listeners at Davos, polite people who don’t attempt to put a speaker on the spot, that the South African Government is taking steps to resolve the difficulty, and that South Africa will soon have a reliable electricity supply.

The truth is that the problem is multifaceted. 

·         The number of households being supplied with electricity, most of it free in accordance with the ANC’s plan to make itself attractive to the voters by being the Party of ‘handouts to the poor’, is increasing dramatically, but the usage of electricity by households is a small fraction of the amount required to support the development necessary to create the jobs to employ all of those people.  The huge influx of Africans, Chinese and Pakistanis after the statement by President Thabo Mbeki that South Africa belongs to the Africans, a statement that implied that the ‘Africans’ do not include the Whites who built up the infrastructure that Mbeki was offering to the rest of the continent, has resulted in a massive population growth, many of them people who are not employed, and probably will not be employed in their lifetimes as a result of the ineptitude of the ANC in generating economic growth and the abjectly poor education all the children receive, making them unfit for any job other than manual labour.  And, of course, the closeness of the ANC to the South African Communist Party and to Cosatu goes a long way to ensure that even the manual labour jobs are being priced out of the market.

·         The failure of Eskom to ensure an adequate and reliable supply of electricity is largely a result of

o   the failure of the ANC Government to authorise the capital expenditure known to them since 2003 to be essential to meet the needs of the country,

o   the failure of Eskom under a series of heavily salaried CEOs, all of whom received large bonuses for their ‘good performance’, to ensure that the essential maintenance was carried out.  This is a failure that is common to all of the organisations that the ANC cadres manage.  In 2012, the executives at Eskom were instructed by the then CEO to cut back maintenance by 80%!

o   the incompetent project management by Eskom of the Medupi project, which was projected to come on stream six years ago at a cost of about 20% of the current projections.  Statements made in November 2014 that the first portion would be in operation by December 15, 2014, only three weeks in the future, were abjectly incorrect, and the date was corrected to January 15, 2015, and, since then, to sometime in March!  It should be noted that the Department of Energy failed to put the year to that date, no doubt having learned that a firm date for a promise to be met is a sure way to attract criticism.

o   the brain drain from Eskom, in common with every other part of the economy, as a result of the flagrantly anti-White statements and policies of the ANC Government, and coupled with the BBEEE policies which state clearly that no White male has any future in the country, has resulted in a serious lack of skills of every type in Eskom, a lack which is presently only partly compensated by the employment of dozens of skilled contractors from abroad.  This condition has not been publicised by Eskom or the Government, probably because that would raise questions about the cost of such contractors and consultants, a cost which could have been saved by employing the local talent and by generating a pool of such local talent by the simple means of ensuring that the schoolchildren are given an education adequate to ensure that their latent abilities are developed to the level needed.  But then, of course, it was Mbeki’s policy to develop a nation of lowly-skilled artisans sufficient to meet the needs of a service-based economy.  One wonders where Mbeki and, by implication the ANC, planned to source the skills needed to develop the economy.

o   The current state of the South African economy, with the economy declining at an increasing rate every month, with SA Bonds being downgraded on a regular basis, and with the promises of Government to make the changes necessary to bring about recovery being observed only in the excuses that Zuma gives at each State of the Nation address, precludes almost any large-scale corrective capital expenditure being made.  The funds are simply not there, and the world financial community is simply no longer willing to pump money into this failing economy.  The QE program of the Federal Reserve has come to an end, and the support that the South African bonds gained from the fact that they offered 5% greater return than the cost of the money will not be there, while the crashing Rand makes any investment in Rands a risky affair.  The only option that will be available to the Government to fund the investment that is urgently required by Eskom will be to print money.  This is a hazardous option in every way, as has clearly been shown by Zimbabwe, but the actions of the ANC in bringing the country to this crisis demonstrate very clearly that the leadership of the nation is either oblivious to the risks, or is willing to undertake them in the hope that they will be able to hang on a little longer, to pad their Swiss bank accounts a little more, and to build fortified palaces to retire to when the gullible public realises that the party has come to an end.

What does all of this mean to South Africa?

The best guess is that the electricity crisis will continue and worsen, until a new Government is able to convince the world that it really means business, probably by replacing the corrupt and incompetent ANC cadres in every field of Government with honest, competent and hardworking people who have the good of the country at heart, not only their own pockets.  That process can start only after the next general election or, as seems to be increasingly likely, after the brewing revolution throws the ANC out of office.  One can only hope that the process of dissolution of the economy will leave enough behind to start the rebuilding process.