Lack of short-term fixes for Eskom - expert

Lack of short-term fixes for Eskom - expert

2015-02-11 21:31

Cape Town - South Africans shouldn’t hold their breath hoping that President Jacob Zuma will announce a short-term solution or strategy to alleviating the country’s electricity problems in his State of the Nation address, according to Izak Odendaal, investment strategist at Old Mutual Wealth.

Odendaal said, while comments on the energy crisis will attract much of the spotlight, there are, unfortunately, very few viable short-term fixes to the problem. Any solutions offered by government would only be able to address the issue over the medium to long-term.

“The good news is that the economy has become less energy-intensive over time. This is evidence of a flexible economy responding to higher electricity tariffs and constrained supply," said Odendaal.

According to Stats SA, electricity production peaked in early 2008, fell during the recession and rebounded in 2010.

“Since 2011, electricity output has continued declining and is now at 2006 levels. But, real gross domestic product (GDP) has grown by 20% over this entire period of falling electricity supply," he said.

"Of course, real GDP would have grown even more if electricity supply was reliable, but the point remains: the economy has not come to a standstill."

This is, therefore, not a "make or break" speech for the economy, which is generally resilient and adaptable enough to deal with crises, in his view.

READ: Govt won't let go of Eskom, other SOEs - expert

Freeing up local economy

Odendaal said beyond the constraints of electricity supply and other infrastructure shortcomings, another issue which investors will be looking to the president to address was ways to free up the local economy, which continues to be hamstrung by too much red tape.

“Many of the growth-enhancing reforms outlined in the National Development Plan (NDP) are opposed from within the ruling alliance,” he said.

“A few weeks ago, the governor of the SA Reserve Bank (Sarb) again said that structural reforms are needed to get the economy going as lower interest rates alone won’t do the trick. Announcements on this front would be welcome, but are not expected."

READ: Load shedding forces SA to cut reliance on Eskom

Implementation vs intentions

Odendaal said the problem with State of the Nation speeches has always been with implementation, not intentions.

“The looming local government election in 2016 certainly increases the pressure on government to deliver, but it is unclear where improvement will come from. The issues that bedevil the public sector, particularly at local government level – low productivity, inadequate management skills, corruption, political factionalism and poor oversight – are not going to disappear overnight,” he said.

Investors will have to read between the lines of Thursday’s speech for cues to what the budget speech might hold, according to Odendaal. The key pointers will relate to how much government might borrow, which will have an impact on the bond market, and South Africa’s sovereign credit rating.

“Although the State of the Nation address is less important than the budget speech, it presents the broad policy framework within which the budget allocations will be done. From the mini budget presented last year, we got a clear message that tax increases are likely.

“The tone of Thursday’s address, as well as the changes expected in the budget speech in two weeks’ time, should put SA in a healthier fiscal position. A reduced deficit and positive signals from government will provide an improved economic position, which will go some way to increase investment sentiment," said Odendaal.

"And it could take pressure off Sarb to raise interest rates and create a more positive response on the part of ratings agencies.”

Odendaal said the State of the Nation address is perceived to be more about pageantry and politics, whereas the budget speech is clearly more about how government intends putting its money where its mouth is.

“Unless there is a major new and concrete policy announcement, financial markets are unlikely to react too much to the State of the Nation address," he said.

"However, the tone of the address could go some way to boosting confidence in the country, especially if the president is honest about the challenges facing the country and presents a credible set of solutions.”

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  • Tebatso Marvelous Monama - 2015-02-11 21:44

    what should we expect then?? Long-term loadsheding?

      Made Inthe South - 2015-02-11 21:54

      Eksdom must give credits so people can install photovoltaic panels on roofs

      Scouter Four-One - 2015-02-11 22:00

      I am afraid so Tebatso - Eskom have already admitted that is what the future holds for SA and it is too late to do anything about it now.

      Nenzi Nens - 2015-02-11 22:01

      Exactly what I am asking....we are expected to accept that this is going to be our way of life for a long time, yet the government and the president won't accept responsibility for anything. As far as the government goes, they have nothing to do with this, everyone and everything is to blame. At what point will their share of this mess be admitted. Tomorrow is a make or break for this country, depending on weather we hear of a plan to correct so many wrongs in many factors or not, and without pre-empting or sounding persimistic I am afraid we are going for the worst.

      Petrus LeRoux - 2015-02-11 22:03

      Made, you can reduce your eskom usage to zero, they will still nail you...its all about getting mula from is just a after thought. ..remember Zuma needs to produce 1 trillion R's for his war mongering boss Vladimir. ..

      lacrimosewolf - 2015-02-12 02:31

      OK so we're not road rockers or pyromaniacs. But we are South Africans Fight or flight time, people. What's it gonna be? No I don't mean guns and circling of wagons - well not in the literal, historical sense. This Alliance has waged a relentless war of attrition against the people of South Africa. It's time to change the game

  • Clive Adrian Hammond - 2015-02-11 21:45

    Whaa ha ha! Jz can offer the only short term solution for this country...step down, walk away! rand will improve, people will work together for a possitve future for all!

  • Clive Adrian Hammond - 2015-02-11 21:46

    Whaa ha ha! Jz can offer the only short term solution for this country...step down, walk away! rand will improve, people will work together for a possitve future for all!

  • Petrus LeRoux - 2015-02-11 21:52

    Err. .We never did hope in the first place...Soon that show on dstv called preppers will overtake generations as the most popular show on SA's TV. In a few months that other show "how discovery saved my life" will be an all time hit...meaning how we were warned I advance what to do in an all out emergency called a total blackout. ..

  • Lucy Afarensis - 2015-02-11 21:59

    There's nothing to expect from our "president". He knows nothing, he can't do nothing and he's good for nothing. A bsolutely N o C hange for the better...

  • Jan Wyn Vermaak - 2015-02-11 22:00

    Zuma jy het niks met eskom te doen nie maak eers jou eie huis skoon.

  • Miss-Dee Manyike - 2015-02-11 22:01

    Jz must just keep the SONA to himself, we are fed up.

      Made Inthe South - 2015-02-11 22:55

      It will be more like a Drona

  • Joe Irwin - 2015-02-11 22:02

    There are no short-term fixes. We will be lucky if we are shedding free in less than 5 years.

      Robert Smith - 2015-02-12 04:38

      as regards "johnny johnsons" reply - I don't think you can blame either fw or even the ANC for this state of affairs - they were both handed poisoned chalices. if instead of the nats being voted in in 1948 and institutalizing apartheid, the people had voted in say the liberal party (who never got more than .001% of the white vote), then maybe maybe there would have been a slow progress to what you have now - democracy. but that didn't happen in Rhodesia and certainly didn't happen in south Africa. so instead of the anc cadres slowly being brought into the economy in higher and higher position - one had the ANC going off to fight a bush war for 50 years - hardly the preparation needed to run a "1st world economy". in hindsight it is all too easy to see how the country has got to where it is now. wjat I find amazing is how there are still commentators around saying that the country can rise - the power can come back - the hijacking can be stopped. of course they are wrong - buy maybe they are all part of that money held in swiss banks

  • Magate Mphela Oscar - 2015-02-11 22:04

    Long long shedding eish mathata

  • derrick.chong.39 - 2015-02-11 22:25

    This is the worst government in this whole entire planet and beyond ! Run by a bunch of uneducated muppets !

      Petrus LeRoux - 2015-02-11 22:37

      Not yet...We have some hope left, ordinary saffas from every creed, colour, religion, language etc wants the country to work, but is in the hands of the majority. 2016 will show if true democracy is prevailing. ...

      Moshoadiba Moloi - 2015-02-11 23:01

      One assumes when you saying that your including all governments. And I say this with a sympathetic heart hoping your thought would grow better beyond beyond your weary conclusion. Which if I may say sounds like you think apartheid government was doing it better. "Interesting View"

      Petrus LeRoux - 2015-02-11 23:03

      We are not slapgat zimbos. .We will kick them under their fat @sses

      Marius Korff - 2015-02-12 07:34

      Hear hear

  • Corlia Van Der Merwe - 2015-02-11 23:03

    Some of us are cash strapped and have revert to take-aways with little or no money!! !

  • catcha.wakeup - 2015-02-11 23:30

    He can always lie about a short term fix. That is totally acceptable for voting cattle and the strength the ANC is built on. Lies. So i will not be surprised if he blames apartheid for problems at Eskom (not the failure to build 1 power station in 20 years) and assure us all will be well soon at Eskom.

  • Ian Trenor - 2015-02-11 23:50

    Lol don't need an expert to tell us that. Seems there are a lot of "experts" stating the obvious these days.

  • Abizou Walkeen - 2015-02-11 23:52

    No no no. He he he. Zupta783 has a long term solution and it involves Russia and loads of kickbacks. More than anyone for for the arms deal.

  • Vinnie Schuller - 2015-02-12 00:49

    I dont really care who runs the country . Besides the o e in charge of the country at the moment. As long as they are honest , reliable and have the people's needs at heart . And to turn the country into what it suppose to be. Oh and put all these thieves behind bars for f..kung up the most beautiful country in the world. BRING BACK THE DEATH PENALTY! !

  • Kyle Twyman - 2015-02-12 02:22


  • Grant Findlater - 2015-02-12 02:26

    I bet Eskom upper management,will still get huge performance bonuses,despite the rolling blackouts.

  • Robert Smith - 2015-02-12 04:27

    exactly what I have been saying for sometime - there are no solutions (at least for next 10 years and even then it is questionable). I am seeing the entire grid go down and down and down

  • Solar Rules - 2015-02-12 05:39

    The only QUICK fix is that government and Epsom allow SOLAR installations to be connected to the grid. In 1 year there can be couple of Mega Watt connected.

  • Jan Vandam - 2015-02-12 05:43

    Dick tator

  • Raymond Kok - 2015-02-12 06:14

    too much chiefs and too little indians everybody wants to be the boss

  • Hennie de Ruyter - 2015-02-12 06:28

    The existing run-down system will become just more run-down. The 2 new power stations plus the Russian reactors (if they happen) will only add max 17MWe which is too little and too far in the future. So this is it, we are stuck. Power stations are not like cars you can look poorly after and then buy another one in a weeks notice.

  • Hell Gate - 2015-02-12 06:43

    The Anc solution to the Eskom crises is to raise more capital through year on year rolling tax increases and to print more money, leading to hyperinflation.

  • Ring Worm - 2015-02-12 06:51

    Arsekom..jy is dom

  • Louis van Zyl - 2015-02-12 06:53

    Sadick. You need the wakeup Before 1994 Eksdom was rated World Class. Then then structural changes were made to its employees and wam. Load Shedding. I fail however to see how your racial attack is going to solve this problem. Or is blame-fixing your solution?

  • Plastiek Spies - 2015-02-12 06:54

    So what you are saying is that zuma will talk a lot but na say anything!

  • Marius Korff - 2015-02-12 07:14

    Zuma is too stupidddddd to say anything that makes sense

  • Todays Realist - 2015-02-12 08:40

    Until the voters decide to change their thinking we will just have stupidity prevail.

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