SA at the abyss

Oct 12 2012 07:00
*Mzwandile Jacks

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Last traded 200
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LATE last week, I had lunch with a very dejected Johannesburg-based securities analyst.

This was shortly after Moody’s Investors Service had just downgraded by one notch the foreign currency deposit ratings of all top five South African banks - Standard Bank Group [JSE:SBK], Absa Group [JSE:ASA], FirstRand [JSE:FSR], Nedbank Group [JSE:NED] and Investec [JSE:INL].

The rating agency said the main driver of this move was its lowered assessment of institutional strength to "moderate" from "high". This was an important factor in the rating agency's judgement of a sovereign's economic resilience.

I asked the analyst if the news had depressed her.  She nodded furiously in agreement.

She said Moody’s in particular named anxieties around the negative investment mood - from creaking infrastructure and wildcat strikes to worries about South Africa's future political stability.

“Well,” I told her, with all the mandate a professional commentator can gather, “Then you should assume that country is facing a political, social and economic abyss more than never before.” She concurred.

Well, let us start with South Africa’s squeaking infrastructure and the causes of this.

Auditor general Terence Nombembe recently confirmed that R11bn meant for infrastructure upgrade in local municipalities had been terribly misspent. 

I think this put paid to all efforts of the sitting government to improve the country’s infrastructure. But the government should blame itself here, because it has dramatically failed to deal harshly with the perpetrators.

To be honest, not many municipalities and officials have been punished for this. Punishment should be the first thing as progress in infrastructure upgrade has been very limited, with government having to pay for disastrous projects.

An example of this was when Minister of Human Settlements Tokyo Sexwale was forced to spend billions of rands to fix houses that were falling apart. This has hampered the entire service delivery process.

Another problem is that properly run construction companies are closing down in great numbers throughout South Africa because of late or non-payment by government institutions. 

The increase in the number of liquidations in the construction sector - this year only - bears testimony to this. Earlier this year, a promising medium-sized, JSE-listed construction company, Sanyati, was liquidated after local governments in the Free State and other places allegedly failed to pay for work already completed.

This means projects that could have been carried out by these professional companies would now be done by less experienced firms.

It is because of this that there is also a serious lack of project roll-out. Non-compliant contractors are allowed to do work without necessary skills. Because of my line of work I have personally visited some areas in the country - and townships in particular - where people with no project management ability among other skills shortages have won huge road construction tenders.

With all this money at their disposal, they have first gone out to buy expensive brand new cars and huge houses. By the time work on a particular project is supposed to start, the capital meant for the project has almost run out.

And what do these tenderpreneurs do next? They comb the townships looking for semi-skilled workers, who are to be found there in great abundance. The result is work that is not up to scratch.

As I mentioned earlier, the national government cannot be entirely exonerated from this. In the recent past, more and more responsibilities have been passed on to local authorities.

Whoever is making these calls at national government level is off his/her rocker. And believe you me, there are many of these people in government. You cannot make decisions like this when most local authorities cannot meet existing challenges because of non-performance.

This makes it clear that South Africa has a problem of creaking infrastructure, despite its intention to fix it with about R800bn of investments for the next couple of years.

Secondly, many observers and commentators believe that South Africa’s post-apartheid honeymoon has come to an end.

This sentiment has been prompted by the carnage at Marikana in the North West Province, where more than 45 people were killed during skirmishes following the mineworkers' strike about eight weeks ago.

And now a wave of violent strikes has hit the country and it is feared this could spread to all the sectors of the economy. The long-repressed anger over the economy growing at a snail’s pace has come to the fore.

This was bound to happen, given that most public sector jobs have been proffered to incompetent card-carrying ANC members. In addition to being incompetent, these officials have not helped the party's case at all.

I recently visited a traffic department manned entirely by members of the ANC and I found the levels of service there quite soul-crushing.

The people on the other side of the counters were rude to the very people that could help them be in those jobs for longer by voting for the ANC.

These are not the only lazy people.

Just call any government office and ask for help; you will be shocked to learn that these are the people paid with taxpayers’ money. They are rude, brutish and nasty.

They do not care whether they are talking to a member of their party. People are angry with this and many other things that have not been included in this article. And this anger has begun to boil over and is going to cause untold political instability.

This was the reason the securities analyst was so depressed. Because of this, she said, more money is going to leave the country instead of coming in.

I dread to see the day when South Africa will have to start afresh, like many countries to our north.

 - Fin24

*Mzwandile Jacks is a freelance journalist.

* Follow Fin24 on Twitter and Facebook.

moody's  |  sa economy  |  transport strike  |  mining unrest  |  banks



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