Week 33 to Saturday 18th
Ben Pieters - the Business Support Specialist
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Privately-run water companies
Ciaran Ryan reports in MoneyWeb that two privately managed water systems in SA that are head and shoulders above their publicly-run peers.
Water losses at Siza Water in Ballito and Silulumanzi in Mbombela range between 15% and 20% against the national average of 47% and the global average of 37%.
SA’s water problem has the makings of a national catastrophe unless urgent action is taken. Two privately-run water concessions, one in KwaZulu-Natal and the other in Mpumalanga, offer a glimmer of hope for the country – if struggling municipalities can be persuaded to relinquish control of water and waste management systems.
The terrifying realities facing the country:
That’s not counting the vandalism to public infrastructure that has allowed private water mafias to take over supplies in many municipalities via water tankers.
This regression to pre-industrial standards is most evident in smaller municipalities where the national government appears to have virtually no control.
The breakdown is happening at the municipal level where water revenues are cannibalised for other purposes, such as paying salaries, perks and corrupt tenders. National Treasury expects municipalities to spend 8% of their property, plant and equipment valuation on maintenance. Very few do.
Lack of good governance is not enforced.
Municipalities cannot afford their staff, says Salga
Antoinette Slabbert reports in MoneyWeb that the South African Municipal Workers Union (Samwu) and the Independent Municipal and Allied Trade Union (Imatu) are insisting on an increase of 8% and some improvement in benefits, while the local government association Salga – which represents municipal employers countrywide – is only prepared to give employees covered by the bargaining agreement 3.5% more.
Salga further wants the majority of municipalities excluded from the agreement, saying they simply cannot afford to pay their workers more.
According to Salga, the 66 municipalities considered by the National Treasury to be “severely financially distressed” and the 157 that are considered “financially distressed” have severe affordability issues and the parties should acknowledge this.
This is the majority (86%) of municipalities.
Salga proposes that these municipalities be allowed to submit applications to pay the increases when their finances have improved substantially and be required to provide financial recovery plans to ensure that they do take steps to improve their finances.
Mayor Cilliers Brink of the City of Tshwane says "The current trajectory of above-inflation increases is unsustainable. Last year, Tshwane was the only municipality that acknowledged this reality. Now Salga agrees with us.”
The municipal manager of a medium-sized municipality in the Western Cape gave some insight into what municipal workers earn. He asked not to be named.
“We pay an unskilled labourer, the guy who holds the spade and digs the trenches, R250?000 per year,” he says. That is at least three times what the same person would earn in the private sector.
Over and above annual increases, staff often get notch increases to move up within their salary band and staff at some rural municipalities also get area allowances.
It is unsustainable. Municipal employees risk being laid off unless a workable solution is found quickly.
Funding woes for Eskom
Tim Kocks reports in Business Day that SA’s plan to expand its power grid has hit a snag: finding investors to lend the necessary $21bn to a near-bankrupt state monopoly, in replacing coal with renewables.
“Our quest to decarbonise ... relies heavily on our ability to expand the grid,” energy minister Kgosientsho Ramokgopa told Reuters at his office in Pretoria in late July.
“But raising R390bn, the state doesn’t have the balance sheet to roll out that size of capital investment.”
Donors offering a total of $11.6bn mostly in loans to fund climate-related projects were reluctant to lend the needed cash to Eskom without sovereign guarantees, which the government could not provide.
That is because of its high debt levels — Eskom owes more than R400bn, even after receiving billions in government debt relief. Financially broke municipalities also owe the utility R78bn, which Ramokgopa calls an “existential threat”.
Burning coal has rendered SA among the world’s top 15 greenhouse gas emitters. It is seen as a test case for aid to developing countries to switch to green energy, alongside Vietnam and Indonesia.
But years of load-shedding have also ravaged the economy, and Eskom has been able to keep the lights on only by firing up coal burners to full capacity earlier in 2024, and most likely increasing emissions too.
Crispian Olver, head of the Presidential Climate Commission, said "There’s simply no way Treasury can put out [sufficient] ... guarantees. The alternative is to ... get the private sector to take on large portions of the risk.”
Eskom’s plan involves building 1,400km of transmission lines every year for at least 10 years. In 2023, it managed 74km. A grim reality faced by all. Decades of corruption and theft by thousands in the public and private sectors lead us to this.
South African Petroleum catastrophe
The Daily Investor reports that Eunomix CEO Claude de Baissac said TotalEnergies’ decision to abandon its gas condensate discoveries in South Africa was an avoidable catastrophe.
TotalEnergies spent at least $400 million using unprecedented engineering solutions to drill in one of the fastest ocean currents in the world.
Energy expert Anton Eberhard said problems with South African authorities are behind TotalEnergies’ decision to abandon its gas condensate discoveries in the country.
“Gwede Mantashe scored another own goal. He’s encouraged PetroSA to engage Russia’s Gazprom to explore options,” Eberhard said.
James Lorimer, a DA Member of Parliament and the shadow minister of environmental affairs, forestry and fisheries, said that "TotalEnergies’ exit from the Brulpadda and Luiperd fields would cost the country at least R100 billion in foregone tax."
Claude de Baissac said that "the TotalEnergies’ decision was linked to South Africa’s poor governance and strategy in the energy and mining sector. He added that the type of transformation forced on companies doing business in South Africa also played a role."
More than five years after the discovery, the South African government did not put things in place to support the exploration. De Baissac said the guilty parties included the Department of Mineral Resources, PetroSA, and Eskom.
Yet another very expensive error on the part of Mantashe. Instead of supporting a local enterprise and job creation, he'd rather go to the Russians. losing us about R100bn in the process. I think it's time for him to retire.
FSCA cautions against prescribed assets plan
Adelaide Changole of Bloomberg is quoted in MoneyWeb saying that South Africa’s financial regulator said it is opposed to any proposals that would compel pension funds to plough money into government-approved investments, as it could compromise market returns.
“There’s a fiduciary duty in the Pension Funds Act, which requires trustees to exercise proper duty toward the fund and the members,” FSCA executive Olano Makhubela said.
“Any interference with that is tantamount of a breach?to the Pension Funds Act, and so we remain of the view that prescribed assets are not something that we should be considering.”
He also said such a step is unnecessary as recent amendments already allow pension funds to put as much as 45% of assets into infrastructure as an investment class.
As such, the government need only provide bankable and investable projects that can pass due diligence checks, and provide attractive returns to lure investments, he said.
“Prescribed assets are the prerogative of government and particularly Treasury,” he said, “But we are quite unequivocal on this one; we don’t think prescribed assets are the way to go” Makhubela said.
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Eskom’s stunning load-shedding turnaround
MoneyWeb reports that since the start of Eskom’s financial year on 1 April, there has not been a single hour of load shedding.
That this has been the case during winter is quite the feat. Peak power demand is 3 000MW to 4 000MW higher during winter than in summer, typically. In recent weeks, it has had an average of 33 000MW of available capacity compared to its “likely scenario” in its winter forecast of closer to 28 000MW.
Notably, Eskom has achieved this turnaround without burning more diesel than last year. Until the first week of August, it has spent just R3.5 billion on diesel for its open cycle gas turbines (OGCTs), nearly a full R10 billion less than the same period last year.
?Also significant is that Koeberg Unit 2 (around 950MW) remains offline for its steam generator replacement.
Eskom will receive a further boost with the synchronisation of Kusile Unit 6 (800MW) and the return to service of Medupi Unit 4 (800MW).
Central to the turnaround, however, has been fixing the performance of the coal fleet.
Its energy availability factor (EAF) in July was 67.41% – an impressive performance, considering in the same month last year, it was more than 10 percentage points lower. Eskom will share its forecast for summer in the coming weeks. Based on its current performance, we should expect good news.?
Quality, Not Quantity, Defines Pilot Shortage
Sheryl Barden writes in IANonline that what exists isn't a shortage of pilots but rather a shortage of qualified pilots.
Despite what some might say, the reality is that it’s still a pilot’s market—and a maintenance technician’s market, too.
If you post a pilot opening today, you might see more applicants than you did last year.
Every week, I hear from retired airline pilots over age 65 who are eyeing opportunities in our space. But will companies invest in a type rating for someone at the very end of their career? And are they willing to transition from a strictly flying role to one that encompasses handling every phase of a trip?
How do we bring in low-time pilots and keep them? It’s not just about getting them hours—it’s about getting them the proficiency required for our operations. Few corporate operators are staffed with enough tenured pilots who can develop interns and manage ab initio-style programs. It takes a solid bench of mentor pilots to create qualified pilots.
The real problem is that we’re not developing enough of the highly experienced, tenured pilots that corporate flight departments are looking for.
The pilot pipeline predicament is real. Until we solve that, we’ll continue to face challenges in attracting the right talent
No doubt that ALL the issues raised can be applied to other professions too. Accountants, lawyers, doctors and people with medical backgrounds such as physios. All are in short supply. We salute these professionals.
South Africans set for R79 billion pension bonanza
Shaun Jacobs reports in Daily Investor that when the two-pot retirement system is implemented on 1 September, South Africans’ disposable income will be boosted by between R31 billion and R79 billion.?
Last month, President Cyril Ramaphosa signed the Pension Funds Amendment Act into law, completing the most significant change to South Africa’s retirement system since 1994.?
The Act will create a new two-pot retirement system that gives members early access to some of their savings.?
The new legislation mandates that all future contributions to retirement funds be divided into two sections –
Asset managers expect a flood of outflows once the system is implemented. The retirement industry in South Africa currently has around R5 trillion in assets, resulting in an expected outflow of around R50 billion to R100 billion.?
This will also bolster the government’s finances through additional tax revenue, lowering its debt-to-GDP ratio by 0.5% in the current financial year and 1% in 2025/2026.?
Early withdrawals, even under the two-pot system, will be heavily taxed and interrupt the compounding process that builds most of the wealth needed for retirement.? Allan Gray urged South Africans not to view the savings pot of their retirement funds as a slush fund.? The new system should not change how investors think about or invest their retirement savings and should not affect long-term retirement savings goals.
A new type of mafia is hitting businesses
Malcolm Liberia writes in BusinessTech that businesses in South Africa are being targeted by criminal syndicates dubbed ‘protection mafias’, and those who refuse to pay face an uphill battle to keep their doors open.
This group of extortionists is particularly rife in the CBD’s of major cities, including Cape Town.
These criminal syndicates demand “protection fees” from business owners and threaten violence or sabotage if payments are not made. This illegal practice has escalated to the point where it disrupts business operations.
These syndicates appear to be targeting nightlife establishments such as bars and nightclubs.
This issue came into the spotlight after a popular bar on Long Street announced it would be closing its doors due to extortion fears. The owner noted that extortion is rife. His establishment has to pay roughly R1,800 per month, but he knew of other businesses that had to pay up to R80,000 per month to avoid disruptions and violence.
Cape Town Mayoral Committee member for safety and security JP Smith noted that “We [the city] cannot have a situation where anybody can prosper and get ahead if these kinds of extortion rackets are going to do what they do. That must end, and I’m deeply committed to making it end with whatever tools we have,” he said.
The South African government and law enforcement agencies are aware of the problem but struggle to contain it, partly due to the deep-rooted corruption and fear among victims. Yet another risk faced by South Africans.
New State Bank for Gauteng
Bianke Neethling reports in Daily Investor that Gauteng Premier Panyaza Lesufi has reiterated his promise to establish a state bank for the province.
Gauteng MEC of Finance and Economic Development Lebogang Maile also reiterated the province’s plan to establish the provincial state-owned bank.
The idea of a state bank for Gauteng was first proposed in 2022 to address the financial needs of sectors that are often overlooked by private banks, such as youth, women, and people living with disabilities.?
“We will intensify efforts to finalise the establishment of a provincial State Bank whose key objective will be investing in projects characterised by low private sector investment and high social returns,” Maile said.
MEC said consensus has been found that it should take the form of a ‘public-private partnership’. He explained that the province is actively looking for a “partner who knows how to run a bank, has systems, money, knowledge and skills so that we don’t try and learn on the job”.
Ruhan Robinson, DA Gauteng Shadow MEC for Finance said “State-owned entities across the board have been marred by mismanagement and corruption.”? He said Gauteng residents deserve a government that is committed to rooting out corruption and not a government that is only focused on enriching those who are politically connected.
Looking forward to the day that politicians realise that a sustainable banking operation must maintain a balanced approach to risk. If the youth, women and people with disabilities are turned away by banks it is due to a perception that this would be risky lending.
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