HomeIndustry SectorsBusiness and marketsLoadshedding: prospects of economic recovery under pressure

Loadshedding: prospects of economic recovery under pressure

The South African Chamber of Commerce and Industry (SACCI) has stressed the devastating effect that Eskom’s loadshedding, that has moved from stage 2, 4 and then 6, has had on the economy.

In a statement on Tuesday, SACCI noted that this is a negative development in the context of the state of the South African economy and comes so soon after Statistics South Africa released its report indicating a contraction in the economy by about 0.6% in the third quarter of 2019. This in turn has a detrimental effect on job creation and economic growth.

Read more: Stage 6 loadshedding-“no cause for alarm”

The current challenges are weighing heavily in the business cycle. This has also caused some mines to shut down operations. Some of the telecoms companies have reportedly had their revenues put under extreme pressure due to lack of connectivity as a result of lack of power in the telecoms towers.

Read more: Eskom must feed available power into the grid, says RE sector

“We have received many complaints from businesses in the retail and other manufacturing sectors not being able to fulfil production schedules on sales orders during this critical period,” SACCI said in their statement.

The government’s promised plans in revitalising the economy by building infrastructure and driving policies for industrialisation will now come into question, as energy is the biggest enabler for any of these plans to come to fruition.

In this regard, the ability to make a dent on unemployment and to stop the economy from going into a recession will become a mammoth task. The result is likely to be adverse, inflationary and interest rate pressure.

SACCI emphasised that Eskom remains the biggest risk facing the economy. “We remain pessimistic about the outlook for a positive assessment by credit ratings agencies. This could further spell doom for our economy as a downgrade to junk status takes many years to reverse.

“Given the above, we urge the government to take drastic steps to get on top of the energy situation in the country.”

The restructuring and solutions relating to Eskom should start with the governance of the SOE itself.

Read more: Nampak’s Andre de Ruyter appointed as Eskom CEO

In this regard, the time has come for the government to re-evaluate its own role and capability on whether it has the necessary competencies, skills and experience to manage an organisation of Eskom’s complexity. 

As SACCI, we remain convinced that the appointment of non-executive directors to SOE boards, should be handled by an independent structure that can be fashioned to be similar to the Judicial Services Commission (JSC). 

We believe that such a step-change in the appointment of directors, will eliminate a lot of the governance dissonance normally associated with the poor performance of SOEs.

It is critical that the shareholder examines its own complicity in the destruction of value, lack of service delivery and the wastage that has bedevilled the SOE sector. 

“As business, we are yet to be advised of the progress made with regards to the nine-point plan committed by Eskom in November 2018 on the turn- around of Eskom.  

“Business had planned around those commitments and we are uncertain about the implementation and progress made with that plan,” SACCI added.

“We are also unclear about the various governance structures that the shareholder has tended to put around Eskom, namely, inter-ministerial cabinet committees, transformation committees, various consultants, the board, national treasury etc. This contributes to a lack of transparency around accountability.

“This is why we believe the restructuring of SOEs cannot exclude the evaluation of the role of the shareholder in the governance of the SOEs. There cannot be any place else to apportion accountability and blame,” SACCI concluded.

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.