The world has been reeling from the financial crisis and Covid19 crisis with reverberations being felt throughout the real economy on production, consumption, jobs and well-being. At times like these, we are all reminded of just how intertwined our future prospects have become and forced to reflect on how history has led us to our current circumstances. The economic progress of past decades has improved the material well-being of emerging economies while South Africa experienced deep looting of state owned companies, established with a centred vision to solve socioeconomic conditions.
The energy sector played a role in creating an enabling manufacturing processes, rapid standardization, industrialization and also make life more comfortable and enjoyable. Energy is the “oxygen” of the economy and the life-blood of growth in a developmental state such as South Africa. Acknowledging that the core problems in Eskom spring from broken generation and the solution is to lose the unproductive and attract the skills, investment and expertise to sort out the existing fleet, is crucial to turning Eskom around.
The challenge is, solutions focused on restructuring debt or finding new capital allocations doesn’t redress the critical deal with the broken vertebrae at the power utility, but cancelling Eskom contracts can assist and have cost effective electricity to help the industrial development and transitioning the economy to sophistication or innovation driven. Eskom’s expensive electricity generation inefficiencies, which are the cause of the growing debt, the collapse of South African manufacturing industry and expensive mining sector, needs be changed and that’s possible through prioritizing new service providers that are affordable.
The government can fix the Eskom problems and they don’t need to sell any division of Eskom to operate well, the president needs to restructure the energy facility as his main priority moving forward, to position South Africa as a manufacturing hub for the continent, that wìll prepare for upstream industrial production and reduce unnecessary imports to the continent.
The PIC propositions to Eskom bailout are steps leading us to the envisioned capable state. The PIC’s . Reuel Khoza highlighted that the impact of the bailout to Eskom and reduce financial crisis the power utility faces for about R400-billion in debt. Tatana Khoza further indicated that, Jointly the GEPF and the PIC have bonds with Eskom and those would amoun, while their proposed feasible solution of using R250-billion in PIC funds to pay some of the utility’s burgeoning debt are strategically placed to rebuilding the power utility as the core oxygen for the South African economy.
The PIC manages more than R2-trillion on behalf of the Government Employees Pension Fund (GEPF); Unemployment Insurance Fund (UIF); Compensation Commissioner Fund (CC); Compensation Commissioner Pension Fund (CP) and Associated Institutions Pension Fund (AIPF). The PIC’s role is to invest funds on behalf of its clients, based on the investment mandates set by each client and approved by the FSCA.
For PIC to be a catalyst of continental economic integration and a global investor and realise their vision to be a global leader in impactful investing, they need to prioritize re-establishing Eskom as a centre for continental solutions in energy, for Industrial development to peak the Africa continental free trade agreement and prepare for a great pie of the targeted or projected materials boom in the next 40 years.
It is a huge risk for the economy to neglect Eskom as diversified portfolio investments will yield lower Interest Rates of Return than expected and the economy will not recover from recession and COVID-19 crisis, as energy is a key driver for an economy.
Today’s global energy and materials industries are characterized by significant shifts, which are creating new opportunities. New trends and technologies are changing the way energy is produced, delivered and consumed, Eskom must adapt quicker. In parallel, and under the current production-consumption model, world demand for raw materials could double by 2060. South Africa must benefit and be a key player in every global economic boom.
Investment, innovation and public-private collaboration are needed to accelerate the transition to a more sustainable, secure and affordable energy system, while optimizing the net social and economic value delivered by materials. Strong partnerships and commitments within the energy and materials industries and across their value chains are essential.
South African focused economic development and Industrial production is needed to be used in pushing the boundaries of the energy and materials future through high-level, multistakeholder taskforces, bringing together leaders from the electricity industry, the oil and gas sector, the mining and metals industry, and chemical and advanced materials companies across the value chain.
Miyelani Mkhabela is the Executive Director for Antswisa Transaction Advisory Services