With the release of 2019 fourth-quarter GDP numbers on Tuesday, we will know whether we are in another period of below 1% growth or, in the worst-case scenario, a contraction that would send us into a technical recession.
In a month in which Moody’s Investors Services may make a call on our sovereign ratings that could send us crashing into “junk” status. It’s not how we would have chosen to enter our autumn, but it is what it is.
Economically we are still at the mercy of one of the country’s largest corporations, the state-owned Eskom. Its operational challenges after years of maintenance neglect make it near impossible to meet demand that is actually less than it was a bit more than a decade ago when the lights first went out.
More than 12 years later and after billions spent in building three mega projects in Medupi, Kusile and Ingula, with some of that investment lost to mismanagement and theft, we are in a worse position on the electricity front, because Eskom’s expansion was built with debt that has ratcheted up to R450bn, stretching the sovereign. Evidence of that tightness is well-reflected in last week’s budget speech.
While Eskom has been the biggest weight of all our 700 state-owned enterprises over the past decade, others such as SAA, SABC, Prasa and the Post Office have fallen into a state of disrepair, either operationally or financially.
In the next three years, these enterprises will continue to be a weight on the state of R129bn. Over the past 10 years, the sovereign has supported them with about R162bn. Bailouts without the requisite reforms have been the general course for dealing with some of these ailing giants that house thousands of employees. This fits the age-old saying of throwing good money after bad.
Though finance minister Tito Mboweni made bold statements in his budget about the public-sector wage bill that will test the state’s credibility in meeting them, I would suggest that an even bolder stance needs to be taken on these ailing institutions. They weigh on our growth in the immediate, medium and long terms.