It is funny how discussions of energy policy bring out the conspiracy theorists. Reactions within the SA public square to writing about energy might not be misplaced on the extreme ends of US political discourse.
Sometimes I think my life would be a lot more fun, and easier to boot, if some of the conspiracy theories about how the private sector actually works were true, but alas not.
Instead, it can be quite dull, yet important.
Take stories about the problems of a functioning trade tariff regime that were highlighted in the press last week. This is about as far away from Illuminati conspiracy theories as you can get. It’s about actually being able to be allowed to trade, yet is desperately important. The fiscus is losing about R1.3bn per year — not from some complex policy or ideological debate, but simply because the machine of government doesn’t function. As much as we might have big debates about the role of the state in Transnet and competition, and so on, the tariff machine issue is simply about what is meant to be the case currently — a certain regime for regulatory decision-making that is not working.
It is the same with issues like why infrastructure cannot currently be banked. The finance industry is going around and around in circles with government on the issue. There are technical issues about project selection and preparation and issues with the Public Finance Management Act’s (PFMA) rules on private-public partnerships (PPPs). The latter is now being changed, slowly but surely. But it is a highly technical process where there is indeed some consensus across the aisle about getting things such as risk-sharing right between the public and private sectors for such public-private projects. The issue is not ideology or conspiracy again but simply getting the “machine” around such projects (created by the PFMA) to actually work in a smooth, predictable and swift manner.
The Financial Action Task Force (FATF) greylisting is another case in point. The highly complex way that FATF works is an exceptionally dry matter that everyone was quite happy to ignore. Now, however, the political games played under the Zuma administration to make state capture easier by politically connected individuals are coming back to bite.
A decision will be made soon by a very technocratic institution that most people have never heard of and which will have profound consequences. Indeed, the lack of market reaction to this so far — given that it is everyone’s baseline that it happens — is quite remarkable.
To get off the grey list will take serious work, not just on detailed technical issues but also on putting some oompf into prosecuting financial crimes. The FATF issue is so interesting because there are so many tentacles to it: changes will be required not just through the Reserve Bank and Treasury but also through the justice department, the department of trade, industry & competition and the private sector. All these things must happen in concert but can still end in failure.
The spectrum auctions are a perfect example of how careful choreography is essential, yet the small details can trip things up. Despite having done an auction, with decent progress being made on digital migration, we are still not there on that issue because of the small details.
Energy is no different. The conspiracy theorists would have it that there are grand designs on such things. But in reality, individual businesses want constant, reliable electricity. As you start to pull on that bit of string it is the small things that matter — the licensing issues, the complexities of wheeling and grid codes, and so on, that pop up — not big ideological matters. Applying some simple lenses — like least cost and jobs — and then things start to take shape. The least cost is because businesses are profit-maximising and, when push comes to shove, people do understand that there are social licences to operate issues in any country. I don’t even believe you need a net-zero view to come out with the same energy outcomes if you apply a least-cost view. The sheer impossibility of doing something outside a net-zero pathway is simply too high for businesses, especially those that are exporting. Once you start to make the choices as a business to want to wheel or embed your own generation, the micro issues start coming to the fore.
This is why the government’s agenda for a capable state is so important. It is not just getting the grand flashy issues right but the boring micro details that actually make an economy work and where growth can be allowed to emerge from.