December seems to have created an odd funnelling for many interesting shifts in the rhetoric about energy and much else in the political economy.
As much as commentators might like to despair of the ANC, its events, like its elective conference, do indeed seem to have a strong catalytic effect on the national conversation.
Various forces within the political economy with vested interests come together — or perhaps rise from an otherwise slumberous state to actually trying to influence the national conversation.
As such ideas seem to take hold despite the thinnest of logic or even no facts at all. Whether it is the suggestion that the Reserve Bank can somehow lower unemployment itself through having a jobs target (rather than the deep underlying structural issues that hold back employment growth), or the idea that somehow a few choices about maintenance and unlocking a mysterious 20GW of easily available capacity that Eskom has apparently squirrelled away — and load-shedding can easily be solved in 6-12 months.
There are no new solutions for SA to solve any of its problems in 2023. This is why noisy and “wrong” rhetoric is so problematic, but its really a zero-sum game as the dial swings back and forward. What progress it felt that was slowly being made in 2022 feels more muddied and further away thanks to the shifts in rhetoric. The media doesn’t help in this regard perhaps — and investors are picking up on this vibe.
There is a sort of lazy complacency in many parts — among all stakeholders — that the known, static solutions just need to have the go button pressed and all will be fine. There is perhaps a complacency (mixed with despair) that while things are worsening — amid an increasingly justified, emotional and visceral reaction of South Africans to the problems faced (load-shedding and water issues in particular) — a solution is close by.
One problem to watch out for in 2023 then is that while progress is made on a range of fronts on rolling out solutions to various crises, we are already two steps behind where we need to be to actually solve problems.
The crisis energy plan was announced six months ago — during which time Eskom’s fleet has degraded further (naturally with age and deliberately with an acceleration of sabotage). Transnet continues its downward spiral operationally and financially while the state of municipal collapse in many areas continues, with not just service delivery but infrastructure problems resulting.
We thus need to continually reassess whether the goals of ending load-shedding, a well-functioning end-to-end logistics system and a well-functioning water system are on course.
The failure at end-2022 of the REIPPP bid window 6 means plans are now 3GW down on where we otherwise should be, with bid window 7 also looking deeply problematic. Substantively ending load-shedding at end-2024 that last year looked possible, if hard, is now impossible. So plans need to shift and adapt.
The bid window 6 debacle further highlights that we are not paying enough attention to transmission, and that the R72bn of transmission investment needed in the next five years is nowhere near likely to be achieved. This creates a hole in the ability to get enough energy on grid in 2024-2027, — again pushing out the end of load-shedding further.
There is deep complacency in the view that extra maintenance is all that is needed — with no understanding or solution to where the money for this will come or what would be done about increasing the levels of load-shedding for two years to take plants off to maintain — or indeed of Eskom having said it wants to target six stations for maintenance but most of the rest are beyond repair as costs and time outweigh results.
Other gems in recent weeks include one minister questioning why Eskom “accepts bad coal” — as if the management wasn’t aware and wasn’t trying to do something about it but are stymied by organised mafia, assassination attempts and a lack of real security cluster support (not a few soldiers deployed who have no ability to do anything).
The other question for South Africans is where all the gatvol reaction to load-shedding and other crises will get you. Here my fear is we reach a second-best outcome in which everyone that can afford it goes (effectively) off-grid — the famous demand tipping point with higher tariffs will be very much in action — and then a complacency sets in as people can, just about, go about their everyday lives. The widening inequality that results is just seen as more of the same.
In some sense we see this already with more than 1GW of new, almost all unregistered, household rooftop solar installed in the past year. Borehole companies report being the busiest yet. The effect of load-shedding on growth in 2022 has been less than feared given adaptation to crises, though underlying unemployment and inequality crises have become worse not better.
These small solutions can drive a minimal kind of survivability for some households and businesses but perhaps risk distracting from a wider breaking point that might otherwise occur within the political economy that is needed to ease the path of the systemic solutions so desperately needed.
Perhaps the tough-love message needed at the start of the year is that the end to myriad crises is not close at hand and that things will get worse before they get better — they will probably have to, before larger change in the political economy occurs to allow reforms to catch up with where they need to be. Indeed even getting a lot of things right this year — and if momentum for reforms can be wrestled back from some of the forces of noisy madness — would not cause the systemic end to these crises either.
Herein is the challenge to the Davos “sale pitch” message to look through current crises. Investors can and do but they aren’t complacent. The period through which you can look through crises cannot be too long — and in some respects it is getting longer.
This year will be successful amid a strong sense that this period of crises investors have to look through is getting shorter, and more credible — rather than longer.