In the not too distant future almost all South Africa SOEs will become case studies at business schools with titles such as “The train ride to hell”, “The pie falls out of the sky” and maybe “Guns and poses”.
The studies will all come to the same conclusions. The demise of the enterprises were due to bad and corrupt management, poor oversight and the rush to get rid of “white” expertise. I guess political interference would also be mentioned.
Daily we read about SAA, Eskom, Sanral, etc. and we see numbers. It is reported that the total debt exceeds R450bn and expanding. Just Eskom will add another R250bn in the next five years. The financial markets are getting risk averse and it is increasingly difficult to roll over debt even with government guarantees. This is no news really, it has been widely reported.
The ANC is hell bent on trying to hang on to everything at the risk of losing everything. No sane investor would.
The nett effect is that the government is allowing SOEs to dig a hole, and they are good at that. I choose to call it a “Black Hole”.
Black Holes are astrophysical objects that attract matter, they swallow the matter and it disappears. A giant toilet in the sky with no outlet. So strong are the gravitational forces in a black hole, even light cannot escape.
Of course no physical black hole is on the horizon but there is another one to replace it. It is called the “World Bank Blackhole.” The WBB is almost the lender of last resort. It is where countries go and it is not pretty.
In the near future Cyril and Pravin will have to pay a visit to the World Bank and Christine Lagard will be waiting for them. Cap in hand, fresh from the President's Jet (PJ) they will reside in an expensive hotel along with 50 bodyguards and an entourage. The SA ambassador will also be pontificating and the show will attempt to go on.
After some official functions with the US government, maybe a visit to Ronald C&Co will head for the World Bank and face off one of the toughest women in the world.
C&Co will plead poverty, make long promises and try to charm.
The World Bank will not have a problem to help but there will be terms and conditions. They don’t have to lend money and when they do there will be rules and performance measurements. They don't take shit.
It does not take an economist to predict what the conditions would be in broad terms:
- Privatise or partially privatise all or all most all SOE’s.
- Reduce the government headcount by 50%
- Invest in renewable energy privately funded.
- Reform the mining charter
- Reform BEEE
- Don’t do EWC
If we not smart we will have mass civil protest.
Austerity, Greek Style.
