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Ramaphosa’s big growth plan threatened by power cuts

Feb 19 2019 11:02
Ferial Haffajee

A major 18-sector growth initiative is imperilled by power cuts now ripping up the economy, warns one of the architects of President Cyril Ramaphosa's signature growth strategy.

At the State of the Nation Address (SONA), Ramaphosa said the Public Private Growth Initiative, stewarded by Minister in the Presidency Nkosazana Dlamini-Zuma, is going to be a key growth driver to boost South Africa's stagnant Gross Domestic Product (GDP).

But the unexpected power crisis which hit the country three days after the state of the nation address is a threat.

"There is a real fear that it (the power cuts) will have a dramatic influence," said Ivor Jenkins, a director of the In Transformation Initiative, the organising agency for the mega growth plan built on a tried and tested Japanese sectoral growth model.

The agency is headed by Roelf Meyer, a former minister and negotiator, with Ramaphosa, of South Africa's transition to democracy.

"If the electricity matter is not quickly resolved, much of this can go up in smoke," said Jenkins. "This is not only government's problem. We must figure out how to fix it."

Unprecedented

The growth initiative is unprecedented in the 25 years of democracy. In 2018, after listening to Ramaphosa's first SONA – in which he called South Africans to service using Hugh Masekela's song Thuma Mina (Send Me) – Toyota Europe CEO Johan van Zyl, who first led the company's SA operation, called up fellow chief executives.

"We can't let SONA happen and not respond," he said.  

A first meeting was called in March last year and the business bosses first decided on three sectors primed for growth to be part of the initiative. Once the idea was laid out, this grew to 10 sectors and expanded to 18.

The growth model is built on the success of the Japanese model led by the powerful Ministry of Trade and Industry (MITI) in that country where government supports sectors with potential. This is the opposite of the special economic zone (SEZ) which is the geographic growth zone model favoured by South Africa's department of trade and industry for most of the democratic era.

Multiple sectors

The sectors include tourism, ICT, mining and 13 others, each of which has come up with a short (in time and documentary) growth strategy which also identifies what government can do to move blockages out of the path of growth. Dlamini-Zuma leads the strategy for government and it is likely to be a significant part of the Budget which will be tabled on February 20.

"The reason it has grabbed business and government's imagination is that it is pragmatic. I do think there is a deep concern from business to say we have the skills, money and we want to make this country work. There is an element of self-interest, of course. There was a sense in business that ‘If we don't make it happen now, we are in permanent long-term economic trouble'," said Jenkins. The power cuts are lengthening the trouble.

Not delivering

Public Enterprises minister Pravin Gordhan said earlier power cuts could continue until April because the two new coal-fired power stations, Medupi and Khusile, which cost over R400bn to build, are not yet delivering reserve capacity to the national grid. There had also been problems off-loading the diesel needed to run turbines which provide emergency power.

This has meant that essential maintenance on the 18-strong fleet of power stations could not be carried out, said Gordhan, who added that the power stations were in a condition of "distinct neglect".

Government ordered a forensic probe into both Medupi and Khusile in December last year, but this has not yet been released.

'Toxic'

Gordhan also blamed the power cuts on a brain drain at Eskom which had been made "toxic" during the era of state capture, he said. Eskom's war-room had been trying to get engineers back, but they had found them dispersed across the world in "Philippines, Indonesia and many other countries."

"The loss of senior skills is not a small matter," Gordhan added, saying that South Africa would embark on a mission to get them back.

The country had also asked for Italy's assistance in getting a team of crack coal engineers to jet out to South Africa in the next 10 days to assess if the work being carried out on the power stations is correct, if the maintenance work is efficient and to identify medium-term solutions to break the pattern of band-aid solutions which plunged the country into now regular power-cuts.

Last Monday, Eskom lost seven units in five hours, plunging South Africa from Stage 2 power-cuts to the longer cuts of Stage 4. At the time of reporting, the utility was running Stage 3 load shedding but announced on Saturday that load shedding over the next few days was not likely.

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