Load shedding puts economy under severe pressure

The South African Chamber of Commerce and Industry (SACCI) says it has noticed the devastating effect that Eskom’s load shedding, that has moved from stage 2, 4 and then 6, has had on the economy.

“This is a negative development in the context of the state of our economy and comes so soon after Statistics South Africa released its report indicating a contraction in the economy by about 0.6% in the third quarter of 2019,” SACCI added in a statement issued late yesterday. “This in turn has a detrimental effect on job creation and economic growth.”

In SACCI’s view, the current challenges are weighing heavily on the business cycle. “This has also caused some mines to shut down operations. Some of the telecoms companies have reportedly had their revenues put under extreme pressure due to lack of connectivity as a result of lack of power in the telecoms towers.”

SACCI states that it has received many complaints from businesses in the retail and other manufacturing sectors not being able to fulfil production schedules on sales orders during this critical period.

“The government’s promised plans in revitalising the economy by building infrastructure and driving policies for industrialisation, will now come into question, as energy is the biggest enabler for any of these plans to come to fruition. “

SACCI says that in this regard, the ability to make a dent on unemployment and to stop the economy from going into a recession, will become a mammoth task. The result is likely to be adverse, inflationary and interest rate pressure.

“Eskom remains the biggest risk facing the economy. We remain pessimistic about the outlook for a positive assessment by credit ratings agencies. This could further spell doom for our economy as a down-grade to junk status takes many years to reverse.

“Given the above, we urge the government to take drastic steps to get on top of the energy situation in the country. ”

SACCI believes that the restructuring and solutions relating to Eskom, should start with the governance of the SOE itself.

“In this regard, the time has come for the government to re-evaluate its own role and capability on whether it has the necessary competencies, skills and experience to manage an organisation of Eskom’s complexity.

“As SACCI, we remain convinced that the appointment of non-executive directors to SOE boards, should be handled by an independent structure that can be fashioned to be similar to the Judicial Services Commission (JSC).

“We believe that such a step- change in the appointment of directors, will eliminate a lot of the governance dissonance normally associated with the poor performance of SOEs.”

SACCI says it is critical that the shareholder examines its own complicity in the destruction of value, lack of service delivery and the wastage that has bedeviled the SOE sector.

“As business, we are yet to be advised of the progress made with regards to the nine point plan committed by Eskom in November 2018 on the turn- around of Eskom. Business had planned around those commitments and we are uncertain about the implementation and progress made with that plan.

“We are also unclear about the various governance structures that the shareholder has tended to put around Eskom, namely, inter ministerial cabinet committees, transformation committees, various consultants, the board, national treasury etc. This contributes to lack of transparency around accountability.

“This is why we believe the restructuring of SOEs cannot exclude the evaluation of the role of the shareholder in the governance of the SOEs.

“There cannot be any place else to apportion accountability and blame.”