By Hadebe Hadebe
On Wednesday, finance minister Enoch Godongwana tabled the 2023/24 budget in parliament. The speech received mixed reactions from economists, analysts, and political parties. Without necessarily taking any position on the budget per se, this article focuses on three areas that could prove controversial talking points in the future. These include incentivising rooftop solar and energy support packages, Eskom’s debt and debt servicing costs, and the budget deficit.
Green politics and its broad impact on the economy are still to be understood by the public. The engineered crisis at Eskom to assist the mainstreaming of renewables is about to bring municipalities to their knees. Loadshedding affects South Africa’s water processing, distribution networks and sanitation. Municipalities in Gauteng recently went through a combination of water and electricity outages. It is almost certain that the country will also soon experience this at full scale as Eskom issues remain open-ended.
Minister Godongwana proposed a plan to attract businesses and individuals to invest in renewable energy under the pretext that the country has to play a role in adaptation and mitigation as demanded by the Paris Agreement on Climate Change. Individuals and businesses will receive tax rebates and other assistance for installing rooftop solar panels. This announcement comes after President Cyril Ramaphosa declared in 2021 that businesses would be allowed to generate power of up to 100 megawatts each without a licence.
The impact of waving regulatory requirements and incentivising private electricity provision is partly to blame for financial hardships in municipalities and securing the socio-economic rights of many South Africans. Municipalities earn a margin of between 15% and 25% on reselling electricity purchased from Eskom. A city like Tshwane stands to lose billions should big industries like Ford in Silverton and BMW in Rosslyn generate their electricity. With millions of citizens classified as indigents, the municipalities cannot extend services to the needy and poor. Furthermore, the downtrodden will not gain anything from the incentivisation of private electricity provision.
The country’s agenda must be saving Eskom and producing electricity from coal. Eskom’s debt relief of R254 billion and further scrapping of R70 billion debt from Eskom’s balance sheet are a good step in the right direction, at least in the interim, as the government attempts to reduce the power utility’s debt to sustainable levels. However, the costs of servicing loans and other debts are expected to average R366.8 billion annually over the medium term, reaching R397.1 billion in 2025/26. Moreover, the unaffordability of debt-servicing costs will send the country crushing due to the geopolitical powerplay that is playing out in South Africa.
Thus, the country is headed toward hard-rocking economic turbulence as the global financial landscape interplays with geopolitics. The decision by the global Financial Action Task Force (FATF) to ‘greylist’ South Africa could impair the economy’s links to the global financial system, raise the cost of capital and create an additional disincentive for offshore companies to deal with the country. The country’s foreign policy choices mean increased pressure to align in an increasingly turbulent international environment. If Syria is a target of bombs, South Africa faces serious financial imperialism.
With the new classification, South Africa now enjoys the unlikely company of the likes of Syria, the Democratic Republic of Congo and South Sudan as it prepares to take over the leadership of the G-20 in 2025. This means the country rubs shoulders with the world’s big boys while languishing at the bottom. The cruelty of geopolitics is on the upswing, and South Africa is currently being pressured to abandon its BRICS friends in China and Russia. Its economic destruction is in full swing.
In the same week as the budget announcement, Africanews.com reported that Russia, China, and South Africa would conduct joint naval drills off South Africa’s Indian Ocean coast to demonstrate close ties. Russia is the West’s unwanted list since the start of the Ukrainian conflict, and China has a tense relationship with the West. This year, South Africa chairs the BRICS formation and will host both Russia’s Vladimir Putin and Chinese premier Xi Jinping in a summit to be held in August.
Republican House Representative John James introduced Resolution HR145 in the US Congress that, amongst others, opposes South Africa’s hosting of military exercises with China and Russia as well as urges the Biden admin to “conduct a thorough review of the United States-South Africa relationship” in light of the joint military exercise. It is now referred to the Committee on Foreign Affairs for further processing. Significantly, Resolution HR145 targets South Africa’s inclusion in America’s unilateral trade scheme African Growth and Opportunity Act (AGOA) and the United States-South Africa Trade and Investment Framework signed in 2012.
The country is likely to feel the West’s wrath for backing the wrong horse in the ongoing contest between the global powers. However, even if Resolution HR145 fails to stand the test for any reason, South Africa could still be forced into alignment via the US Senate Resolution S.Res.531, which would seek to designate Russia as a State Sponsor of Terrorism. S.Res.531 and the FATF greylisting basically declare South Africa as a new member of the infamous ‘axis of evil’ and a soft target of the US-led violence and economic imperialism.
Nevertheless, South Africa is a centre of focus in a fast-spinning geopolitical orbit. Africanews.com states that Russia and the US have intensified competition to have Pretoria choose a better devil. In this regard, “the two superpowers have vied for influence in Africa, sending top officials on diplomatic missions to the continent in recent months.” US Secretaries of State, Antony Blinken, and of Treasury, Janet Yellen, have visited the country to deepen diplomatic, political, and economic ties. Russia’s Foreign Minister Sergei Lavrov was also in Pretoria for talks.
Overall, Godongwana’s budget did not capture South Africa’s economic survival under the barrage of Western financial imperialism and intensified geopolitical competition akin to the so-called Cold War between the US and the Soviet Union. As a result, the West could soon tighten the noose on South Africa and its economy for dancing with Russia and China. The implications could be vast for South Africa, which could face economic sanctioning beyond the FATF greylisting.
Siya yi banga le economy!
Hadebe is an independent commentator on socio-economic, political and global matters based in Geneva. The views expressed here are his own.