5 hits, 5 misses in 2019: We were doing so well until we were doing so badly | Fin24
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5 hits, 5 misses in 2019: We were doing so well until we were doing so badly

Jan 02 2020 19:59
Lameez Omarjee

As South Africa celebrated 25 years of democracy in 2019, President Cyril Ramaphosa time and again stressed that boosting the county's struggling growth rate was one of the state's key priorities.

A number of reforms were attempted in a bid to lift growth and ensure the country had a stable supply of electricity, while judicial commissions of inquiry continued to probe the scourge of state capture at state-owned enterprises.

The result? While there were gains and losses, South Africa's economy often seemed to be taking two steps forward, only to find itself taking abruptly its next step back.

Win: R363bn in new investments

Government's second annual investment conference was held in early November, part of Ramaphosa's drive to raise R1.2trn over five years in new foreign and direct investment.

During the inaugural conference in 2018, about R300bn in investment commitments were made. The 2019 conference did better, with 17% more commitments made for a total of R363bn, as Fin24 reported. The pledged investments would see jobs growth of 412 000 over the next five years, according to Ramaphosa. The president at the time said the commitments were a "real achievement", especially in light of the economy struggling to grow.

Loss: Flat growth

Despite hopes that high profile investments would boost economic growth, expectations are that growth in 2019 growth will remain flat.

Treasury has revised down its 2019 GDP forecast from 1.8% at the national budget in February, to just 0.5%, as has the Reserve Bank. 

And after facing a recession in 2018, the economy contracted twice last year – by 3.2% during the first quarter, and by 0.6% during the third quarter. It managed to grow by 3.1% during the second quarter of the year. 

So, while growth for 2018 was a mere 0.8%, it now seems that the SA will fall under this in 2019.  

Win: Integrated resources plan gazetted

Mineral Resources and Energy Minister Gwede Mantashe in October finally gazetted the long-awaited integrated resources plan for 2019. The plan is the state's official blueprint for future energy generation, and includes projections for electricity demand, cost estimates and potential sources of power. The IRP 2019 includes nine interventions for the country to respond to its energy needs until 2030. 

It shows that government will expand its energy mix to include more renewables such as wind and solar, and cleaner coal technologies over the next decade. But the majority of SA's electricity will still be produced from coal in 2030.

Loss: The wrong version of the IRP 2019 was gazetted

Mantashe's announcement was eclipsed by an embarrassing blunder when the wrong version of the plan was gazetted.

The incorrect version of the plan stated that government plans to immediately commence with a 2 500MW nuclear build programme. The correct version of the plan indicates that nuclear power will only be pursued at a pace and scale the country can afford.

Win: SARS relaunches Large Business Centre

As for efforts to restore the capacity of the South African Revenue Service, new Commissioner Edward Kieswetter in October relaunched the Large Business Centre, which is responsible for facilitating revenue collection from large corporate companies. It was shut down in 2014 by former commissioner Tom Moyane, which negatively impacted tax collection.

The unit is expected to service all JSE firms, multinational firms, business enterprises with a turnover more than R1bn, and high net worth individuals with total assets over R75m.

Loss: Revenue shortfall ahead

Despite efforts to improve tax revenue, Treasury in its medium-term budget policy statement in late October projected that tax collections will be undershot by R53bn or 4% less than expected. While SARS has been tasked with collecting 1.422trn, Treasury has revised down the target to R1.37trn.

Tax experts have linked the low revenue collections to an under-performing economy, and capacity issues at the revenue collection agency.

Kieswetter told Bloomberg in an interview that SARS had constrained resources impacting its ability to meet targets. "The resources that have been allocated to SARS have been significantly constrained, for no other reason that there just is no money," he told Bloomberg. "Unless we have the resources to rebuild the capability, the project of restoring SARS is at risk."

In the medium-term budget policy statement, meanwhile, SARS was allocated an additional R1bn for the next two years to boost its ability to collect tax.

Win: Eskom special paper released

Public Enterprises Minister Pravin Gordhan released a special paper on Eskom, broadly outlining the unbundling process, which will see the debt-laden national power utility divided into three entities – generation, transmission and distribution – by December 2022. All three entities will still fall under a government-run holding company. 

While the roadmap clarifies government's intentions for Eskom for the next 10 years and more, the special paper did not indicate how Eskom's debt of R450bn would be reduced, and Finance Minister Tito Mboweni has said the state government will not be granting further debt relief at this point. Ratings agencies have have warned that dealing with Eskom's mounting debt burden is one of the key challenges the state of facing. 

The paper does, however, unpack options for Eskom to save costs, such as reviewing coal contracts, in a bid to achieve financial stability.

Loss: Stage 6 load shedding

In early December Stage 6 load shedding was introduced for the first time due to, among other things – a technical failure at Medupi Power Station. Other factors include heavy rains resulting in wet coal, unplanned outages and the age of power stations. Stage 6 load shedding allows for 6 000MW to be shed from the national grid at a time.

The president cut short a trip to Egypt to address the nation on the crisis. He assured there would be no load shedding over Christmas, and Eskom executives and management would not be taking leave over the festive period, Fin24 previously reported. Ramaphosa also said that about 2 000MW was temporarily lost due to sabotage at Tutuka power station in Mpumalanga, although Eskom later clarified this did not directly contribute to Stage 6 load shedding. 

Eskom, meanwhile, has proposed to Cabinet that in order to bolster its capacity an additional 5 000MW must be made available – potentially from Independent Power Producers.

Cabinet has called for new CEO Andre de Ruyter to start his appointment at the power utility sooner than the scheduled January 15, 2020. 

Business Day reported that De Ruyter started his term at Eskom shortly after Christmas Day.

Cabinet has also said the energy war room will be re-established to deal with the challenges at Eskom.

Win: Clean-up at Passenger Rail Agency of South Africa

The Passenger Rail Agency of South Africa in 2019 announced several suspensions and placed a number officials on special leave while investigations into allegations levelled against them had to run their course, Fin24 previously reported.

The board of control wasted no time in dismissing officials who were found guilty of charges – including the general manager responsible for risk management Matome Mohube and company secretary Lindikaya Zide.

During the period Prasa also appointed a new Group Chief Procurement Officer Keabetswe Mpane and a Group Executive of Human Capital, Thandeka Ndilikazi Mabija.

Prasa also appointed its first permanent Chief Financial Officer in five years Japhtalina Lesibana Fosu.

Loss: Disclaimed audit opinion

Despite making progress in its clean-up, Prasa's audit outcome for the 2018/19 financial year was far less than stellar. Prasa regressed in its audit outcomes - from having a qualified audit opinion in 2017/18 to a disclaimer of audit opinion. A disclaimer of opinion is given when there is a lack of sufficient evidence given to the auditor general on which it can base an audit opinion, Fin24 previously reported.

The Auditor General Kimi Makwetu pegged this on a lack of leadership stability and accountability to address findings by the AG in previous years.

Prasa – dubbed by the AG as a "top offender" of irregular expenditure - saw its irregular expenditure for 2019 expand by R3.037bn to R27.2bn. This was mainly linked to the contracts awarded for infrastructure-related projects not complying with supply chain management legislation.

Transport Minister Fikile Mbalula, who was less than pleased with the poor audit outcomes, told Parliament that he requested the board of control to explain why they had not complied with their fiduciary obligations with regard to the Public Finance Management Act.

Mbalula ultimately dissolved the Prasa interim board and placed the entity in administration, Fin24 previously reported.



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