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Saturday, February 16, 2013

David Lipschitz Comments on President Jacob Zuma's 2013 South African State of the Nation Address

A number of people have been asking me to write, so here is my comment on the President Jacob Zuma's 2013 South African State of the Nation address.

Note that for those who don't know I am now back to doing IT programming work 99% of the time and the other 1% I am doing RE consulting, training and speaking at conferences. My next conference is the Power and Electricity World Conferencein April in Joburg where I am presenting a one day workshop on Virtual Power Stations.

I've read the whole 2013 State of the Nation Speech and the message that comes through is that government is better at providing services than the private sector. Considering that the private sector contributes all the tax that allows the public sector to operate, I find this a very strange message.
Government should be allowing the economy to grow fast, thus generating huge tax revenues which will allow it to pursue its policies without borrowing. Extensive Infrastructure Borrowing is the best way to burden the poor and middle class of a country, and prevent the opportunity for massive growth as people are burdened with debt and can't think straight. But the South African government currently gets its revenues from things that allow a normal economy to grow, for example water, electricity, petrol, transport, visas, etc. Overtaxing these resources is what Spain's Iberdrola Energy Company's CEOsays has led to his company doing more and more of its business outside Spain where it can actually make a profit. Spain loses out. This type of thing is happening in South Africa. We see it with our top 40 companies. The top 40 index is growing rapidly, whilst South Africa stagnates. The reason for this is because South Africa's top companies do more and more of their business outside South Africa.
Our Government is intent on borrowing R2.3 Trillion just for increasing our electricity supply. And then there are more Trillions for other infrastructure projects. And more money to come from somewhere to pay for the new National Health Insurance Service (called the NHI), to be rolled out in 2014.
Repayments at 10% per annum over 20 years on R2.3 Trillion (R2,300,000,000,000) are R23 Billion (R23,000,000,000) per Month. South Africa's 7 million tax payers would be forced to pay R3,285 per tax payer per month just on repayments for the build program, never mind actually paying for any electricity from these plants. And government has shown that it cannot manage the build of its own coal fired plants, Medupi andKusile which should have started coming on stream in 2012! How can we trust them with R2.3 trillion when they have shown they can't manage R250 billion. And then they blame the bigconstruction companies for their waste, lack of oversite, and mismanagement.
At the same time as this, government makes it more and more difficult for business, and especially small business, to do business. Big business can afford to have full time people interacting with government. Small business can't afford this.
We are moving on a dangerous course towards a Communistic system where the state does everything and where the entire population works for the state. I believe that the only way that South Africa will be able to pay for this kind of system is with mass exploitation of its mineral resources, which includesFracking in the Karoo and Coal mining in sensitive water scarce areas along the Orange and Vaal Rivers.
This course of action will create much worse poverty and much higher unemployment. This is called the "Resource Curse", which refers to the paradox that countries with massive natural resources are worse off than countries without natural resources. 
There are alternatives which are much cheaper for South Africa and for the environment. I agree with President Zuma that South Africa should be growing at 5% plus per annum as this is the only way jobs can be created. According to David Murrin in his book "Breaking the code of history" a modern economy needs three things for dramatic growth: resources, population growth and electricity. South Africa has the first two, but our government has made it impossible to share out the electricity load amongst its State Company Eskom and the rest of us. Until this particular problem is resolved, we can look forward to more of the same, ie an unnecessary recession where South Africa remains the 37th fastest growing economy in Africa!
It should be noted that government's own policy (strategy) "white papers", the Energy White Paper of 1998 and theRenewable Energy White Paper of 2003 allow for competition "30% by 2010", but this has never been implemented. Government has continued to confuse the market with announcements which it has no intention of implementing, for example Feed In Tariffs in 2009, which it said were illegal in 2011! And more recently the IPP process has been delayednumerous times, costing the investors millions.
And for those of us who want to sell electricity into the grid, which is "allowed", we need to follow 15 laws, obey 10 standards and fill in 10 documents. In the USA there are 2 laws, 3 standards and 1 document. In Germany, one can install a system and then have an inspector inspect it. Once the inspector gives his "ok", one gets the Feed In Tariff 8 working days later.
If President Zuma and his National Planning Commission (NPC) are intent on making South Africa the gem of the world, then it must allow the private sector to grow. The fastest was to allow this to happen would be to implement the Independent Grid System Operator Model as soon as possible and allow private people to feed energy into the grid and to allow private companies to buy and sell electricity from each other. At the same time as this the administrative burden on small business must be reduced, for example go back to one PAYE reconciliation a year instead of the current two reconciliations. And government wants us to do four reconciliations a year!
Grids like the rail network in Europe, the International Telephone Network, the International Air Traffic Control Network, and other grids are examples of where central independent grid operators can allow private companies to use their grids. South Africa doesn't have to invent anything. It just needs to follow international best practice, without doing massive 10 year research projects to work out what is best practice!
The NPC called for Active Citizens. I spent 35 hours writing a40 page response to the NPC's 444 page draft document and I didn't get any kind of response. Greenwashing is rife in South Africa. Distrust is rife. And all because government wants to do everything itself.
Come on ANC, DA and all the other representatives of South Africa's citizens. Let's work together to make South Africa great.