Publication: Cape Times
Issued:
Date: 2008-01-04
Reporter:
Whatever else happens, the country is in for an interesting, if troublesome,
year. The economy is faltering, increasingly strangled by
fuel prices that seem set to continue rising; serious skills shortages in
virtually every sector of the economy; a volatile currency; an inflation rate
that stubbornly forces up prices and interest rates; deteriorating
infrastructure; electricity shortages *1; and political uncertainty
focused around Jacob Zuma *2.
This all means that the poor old consumer will have less and less disposable
income and that more people will drop below the breadline,
while we see fewer jobs, higher crime and all the other social ills *3
that develop as the economy is squeezed.
Not that we can complain too bitterly. The economy has had its longest growth
since the 1960s. Investors in both the stock exchange and property have had
unprecedented returns. Companies have shown some extraordinary profits,
especially in the banking and retail sectors, among others.
Job creation has been impressive, albeit too slow. After 13 years of democracy,
service delivery is at last actually catching up with backlogs, although this
may be forced to slow along with the economy.
Economies flow in cycles and, after a long economic upswing, recessionary
influences are inevitable.
But all is not gloom. The almost R500 billion being spent
on the 2010 Fifa World Cup *4 is still flowing through the economy.
And belated as it is, Eskom is planning to spend around
R150bn *5 in the next few years on improving electricity generation.
Transnet is expected to spend about R80bn on its infrastructure, of which
R18.5bn will be on ports. The airports authority will be spending R20bn over the
next few years on its airports, while Sasol plans to spend R65bn over the next
three years.
All these projects, along with those in the private sector, will act as a
cushion against recessionary forces, keeping the economy more buoyant than it
may otherwise be.
The trick is to show resilience, tighten the belt, discharge as much debt as
possible and ride out the storm.With acknowledgement to Cape Times.
*1 The legacy of Thabo Mbeki.
*2 The legacy of Thomson-CSF.
*3 The legacy of Thabo Mbeki.
*4 Can this possibly be R500 billion?
If so it makes the money spent on the Arms Deal small potatoes.
If it is R500 million, then this won't much to help us.
*5 The ANC through its special purpose investment vehicle,
Chancellor House [(Pty) Ltd?] is going to get about 30% of the profits of this.
Normally the nett profit for such a project is about 10% of contract value.
So 30% of 10% is about R4,5 billion Rand. Tax is about a third of nett profit,
so the ANC walks away with R3,0 billion for doing diddly except squatting in the
right places at the right time.
Also this Eskom expenditure is just the start of its delayed capital investment
programme and really only consists of two coal-fired power stations in the
Northern Province and Mpumalanga Province, plus some demothballing of a few
power stations. The real big stuff starts a few more years from now and consists
of a new nuclear power station, quite a few pebblebed nuclear power stations and
a few more coal and gas power stations. That amounts to some R850 billion (yes,
billion) over the next 30 years.
Don't be too surprised if Chancellor House has slices of the pie in the Transnet,
Airports and Sasol pies.
Mixed fortunes, indeed.