The public sector wage war and Eskom’s debilitating debt are key focuses in the coming year, yet the largest hurdles to be overcome are the political issues around energy policy

A version of this column was first published in Business Day 

All the right decisions always get made, eventually. The key question for 2020 is if the right decisions will be made before the cliff edge, or at the bottom. The cliff is partly Moody’s but also more generally the impact on growth and unemployment from not making the right decisions as business sentiment gets glued to the floor.

The problem next year is the right decisions will get harder as political contestation increases into the ANC’s national general council and as the centre frays, after a downgrade and calls for fiscal and monetary stimulus boil over. Three particularly crucial broad sets of decisions must be made.

The first is on the public sector wage bill. This is hobbled by severe capacity constraints within government, which are hampering negotiation strategies, but also a lack of political will — yet — to be able to get stuck in with unions on this hugely complex problem.

Ultimately you cannot socially compact or even really negotiate wage freezes with unions because nothing can be given in return of substance — it has to be imposed by the adults in the room. Unions will care little if leaders take pay freezes when their whole raison d’être is that there should be a fiscal stimulus. This is a problem that may only result in real movement after the cliff edge.

The second problem is Eskom’s debt, which must result in a solution in the coming fiscal year. Eskom will struggle to fulfil its funding plan, in particular a challenging USD bond issuance due in February. The sheer unsustainability will come home as Eskom needs more and more money, and new CEO Andre de Ruyter will need the financial breathing space from deleveraging.

Yet there are too many cooks involved when standardised cookie-cutter solutions are available to be rapidly deployed. A solution will come only after a proper funding crunch, when the adults enter the room and take charge of the situation with appropriate advice.

The final issue is more politically complex. Energy policy in SA is a mess and confusion is getting worse despite attempts at government spin. The energy war room offers the opportunity for adults in government wrest control of energy policy from vested interests, highlighting and unlocking blockages.

It is a bizarre situation that everything faces in the right direction after the integrated resource planning, but no movement is occurring. There are endless discussions between projects, the national regulator of SA (Nersa) and the department of mineral resources & energy, which have seen the blockages transparently highlighted, but no movement.

The request for information released last week is creating more confusion by trying to replace the well-established best- class renewable energy independent power procurement programme and lumping disparate technically types together. There seems to be a hunt for costly short-run projects linked to vested interests over lower-cost embedded and distributed energy solutions.

There is an odd characterisation put forward by some in the government that the renewables industry is at war with coal. This is a deflection. The government should get a move on and try to procure clean coal, and nuclear if it wants, or pump money into research there — and procure renewables via the  renewable energy independent power procurement programme at the same time to adhere to the integrated resource plan. This is not being haphazardly jumped into action when there is a crisis — given the policy (integrated resource plan) and mechanism (renewable energy independent power procurement programme) are already there.

The problem is the sheer global inevitability of the energy transition coming together, with the lack of financing and technological problems for things such as clean coal seeming to mean that nothing can move until there is some unlocking of favoured technology types. Delay seems politically preferable for the department of mineral resources & energy.

Energy policy is going to be a focus, and is an easy way to unlock sentiment, because it is linked to load-shedding and it shows how urgency can manifest into positive spin, but not urgent action straight away.

Currently, there is no evidence of action with any urgency to procure power that could with certainty be on-grid in 2020 (such as liberalising embedded generation) and not beyond (such as other options on the table) or an request for information process that will drag on.

A deeper change of mindset is required which is ultimately a sidelining of political blockages in particular. There is an opportunity for this to happen in the war room before the cliff edge is reached.

There are many other issues that need unlocking, such as spectrum, infrastructure, skills visas and so on. But the three issues above are the most crucial to watch versus the cliff edge.

• Attard Montalto is head of Capital Markets Research at Intellidex