PETER ATTARD MONTALTO: Putting a just energy transition at centre of Sona would be a winner

Putting a just energy transition at the centre of President Cyril Ramaphosa’s February Sona would be a winner.

This column was first published in Business Day. 

What’s the point in it all? If we think about the forthcoming state of the nation address (Sona) as meeting an expectations bar and the budget for “doing nothing” on its framework, both will hugely surpass expectations.

But instead of thinking about it that way, as post-match analysis is always done, what should the policy focus for the year be? What about specifics?

While I would love a hefty, two-hour slide presentation of micro movements of who’s doing what where, who exactly is working on what in Operation Vulindlela (priorities, oversight and accountability functions), most people wouldn’t — especially not your average family watching the evening news.

How about narrative? That’s difficult, because the economic recovery and restructure programme speech was about implementation and infrastructure as the narrative for reform. Yet little convinced.

While there has been marginal progress on some issues behind the scenes, major shifts forwards since then have not occurred — especially on the “big three”:

  • Spectrum auctions look further away due to court cases.
  • The renewable energy independent power producer procurement programme (REIPPP) bid window 5 is drowning in the department of trade, industry & competition not understanding a chicken-and-egg problem of local manufacturing capacity of renewables (and has missed an end-January deadline).
  • Visa reform is taking an interminable amount of time.

Infrastructure has not been built on scale and the lack of movement from projects taking shape may well leave the budget looking quite deflated. The lack of follow-through from the economic recovery and restructure programme to the midterm budget policy statement on aspects such as public-private partnership reform that the Treasury should be working on could be a hole the government can again fall into in February.

It is not so much a lack of ideas but a problem with joining the dots between ideas. The recent ANC lekgotla’s economic presentations reflected this — ideas such as localisation first without the demand to create new capacity, a presentation that seemed more excited about new nuclear than renewables, and a general attitude of “don’t ask any questions on fiscal”.

From talking to national executive committee (NEC) members, one did not get the impression of blazing, exciting policy rows, debating the evidence of various sides’ competing claims.

This means difficult, knotty issues remain hanging. The NEC’s social arm is asking for a basic income grant and grant extensions — a needed, necessary and just intervention. The economic arm is saying don’t upset the fiscal cart, which is also a healthy, risk-averse response to an impending fiscal crisis.

Yet this kind of debate should be taking place in which both sides are “right”, ways through are hard but can be found, priorities are agreed on and set and the consequences deliberated and strategised over. That is ultimately the politics of policy. It makes one wonder if the tripartite alliance actually does politics at all?

Proper vision

What about lofty vision, agenda and drive in Sona then? If one looks back at Sonas in the past decade, that would be rare. Where it has been tried, it has fallen flat — think high-speed trains and smart cities, which were possible and important yet seemed out of place and against the national mood. They were too narrow.

A proper vision that can stick should tie the budget and Sona together. Long-term visions and targets are needed that deliver short-run goals regarding jobs, skills, financing, cranes and action. Vision is ultimately about setting a path that gives people a common purpose and leads to pipeline certainty to invest in capacity.

A Sona for a just energy transition, maybe? A green recovery budget? It ticks all the boxes — investment; infrastructure; foreign direct investment; bank lending; jobs; skills; world-leading natural endowments; energy security; manufacturing; (sustainable localisation); small, medium and micro enterprises; big business; tax revenues and liberalisation.

A sweeping narrative arc that plays out as much on the evening news as it does globally to investors can easily be constructed on this theme. It shows leadership and agenda. It shows you need two terms as president.

So much work is going on in this area that needs to be unleashed by different thinking in the government, the ANC and the Treasury.

The politics is tough — the corrupt and the vested interests intertwined through the ANC and tripartite alliance miss out and end up lumped with some stranded assets.

The ANC lekgotla, knowing the complications and loving compacting, has decided to set up a working group on making carbon commitments — particularly a 2050 zero carbon commitment. The problem for the tripartite alliance is that making such a commitment for climate change conference COP26 in November is necessary and inevitable — the country won’t get a huge treasure chest of just energy transition funding from offshore otherwise, and will find itself increasingly ostracised not just from the direction of policy but also as places such as the EU start imposing carbon content of import taxes. But the ANC has a reflexive reaction to such “required” decisions.

Many things will have to take place automatically, with a patina of compacting, but there is little choice:

  • A much faster pace of Eskom decommissioning.
  • Changes to the industrial policy of car manufacturing.
  • Redirecting skills budgets.
  • Fast-tracking new manufacturing sides in renewable energy industrial development zones.
  • Breaking with the past and updating the Integrated Resource Plan (IRP) every two years.
  • Switching the REIPPP process to be an auction process that allows unlimited new build that meets a price camp and a minimum economic development score.
  • Fast-tracking municipal energy procurement protocols.

Drowning this in process, after the tripartite alliance working group, then allowing the unions a second bite in Nedlac for instance would be a mistake.

This will be politically challenging because at such a basic level it is something the ANC will be unable to micromanage and control. It will either set the foundations, regulations and rules and allow the just energy transition to proceed at pace, or it will micromanage it to death.

Like being in white-water rapids, the choice is not the direction of travel — it is whether you navigate it in a boat with an oar or you are in the water, swept along below the surface.

The Sona is a chance to create a slipstream and a narrative boat that uses this inevitable global direction of travel, a set of SA-specific interpretations, and builds a bridge that takes the popular and political actors with the president. If it ticks all these boxes, it should be vote-maximising and a victory in the ultimate political test.

Alas the pomp, ceremony and partying isn’t available at Sona this year. The president could still surround himself with flags and dress in an SAA pilot’s uniform. But that is unlikely to cut it. It better be something substantive and awe inspiring — a rallying theme for a just energy transition recovery that stirs some passions.

Attard Montalto is head of capital markets research at Intellidex.