Towers of Babble

Barry Sergeant, Moneyweb, 20 March 2008
Do South Africa’s policymakers have a plan . . . any plan at all? And is Deborah Moosa related to Valli Moosa?

JOHANNESBURG - This year will go down as the one when South Africa's policymakers elevated their game to one of pure gibberish, a process that's taken less than 14 years from the day of "democracy". There is of course the gobbledygook chatter around who is really running the country, with a choice of two presidents - Thabo Mbeki, president of the country, and Jacob Zuma, president of the ANC.

Does it matter which president is pulling which strings, when there is increasingly less evidence that the country is being run by anyone at all? Leave aside the Eskom debacle for a moment, and consider the country's parlous and deteriorating financial situation. Down at the Reserve Bank on Wednesday, Reserve Bank governor Tito Mboweni (who reports to Finance Minister Trevor Manuel) casually referred to how South Africa recorded a current-account deficit of 7,5% of GDP (gross domestic product) in the fourth quarter of 2007, and 7,3% for the year as a whole.

The inside back cover of any recent edition of The Economist presents all sorts of economic and financial data for 42 selected countries. Thanks to its excessive imports relative to exports, fuelled by years of over-accommodative interest rates from the Reserve Bank that have spawned a housing bubble and fuelled a consumer frenzy, South Africa carries the second-highest current-account deficit in the world, relative to the size of its economy. South Africa also carries one of the highest rates of inflation, and some of the highest interest rates. In unemployment, the country is a staggering winner: a 25,5% rate, more than double the next-highest number.

Mboweni was further nonchalant, saying that "As before, the deficit on the current account was more than fully financed through inflows of financial capital". Right . . . here we go, again. The latest numbers from the JSE, which houses the Johannesburg bourse, show that so far this year, foreign trade in listed stocks has seen a net outflow of R11,6bn, compared to a net inflow of R22,5bn for the same period in 2007 - a net swing of more than R34bn. Foreign investors are becoming increasingly tetchy about South Africa, especially so since January 24, when Eskom bit the dust, dumping general mayhem on the country and the subcontinent, and forcing this country's mining sector to shut down for up to five days.

This week, Wednesday morning, Eskom had 29 533MW generating capacity available. According to page 188 of Eskom's 2007 annual report, it has total net maximum generating capacity of 37 761MW. According to media reports, the massive difference between the two numbers on Wednesday was attributable to 18 Eskom generating units that were down - of which half were scheduled, and half "unscheduled". The bottom line. . . ignoring the gibberish . . . is that Eskom simply does not have a plan.

Anyone who doubts this needs to know that since January 24, various private sector initiatives, from both South Africa and abroad, have made friendly attempts to try and parachute the best possible people into the mess at Eskom. The reaction from Eskom has been fairly standard, and, given a family audience, is best left to the imagination. Eskom is apparently trying to prevent people from finding out that it doesn't have a plan, when everyone on the outside already knows that. There are people in the private sector who can rapidly back-and-fill a number of Eskom's more immediate failures, but they're not even getting through the front door.

Infiltrating the Eskom story is a tough nut, but it's far from impossible. Formal channels yield very little, as one little example will show. One of Eskom's recently appointed spin doctors was recently given a list of directors of Eyethu Coal, one of Eskom's "approved" black economic empowerment (BEE) coal suppliers, including the name of Deborah Moosa. By now, the entire country knows that Eskom's BEE coal suppliers have failed, and failed miserably. The question: is Deborah Moosa related to Valli Moosa, the chairman of Eskom? Don't expect any meaningful answer, not from the spin doctors. If the two are related, at least it would indicate that there was some kind of a plan, or at least a mini-plan, but let's not go down that path right now.


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