Government incompetence and electoral irony – Johannes Wessels

Written on 11/04/2022
Editor BizNews

The only explanation is that the ruling party’s focus has been (and remains), on self-enrichment rather than on service delivery, as testimony before the Zondo Commission made clear.

Reading this excellent data-based reprise of South Africa’s infrastructure decay at the hands of the ANC government leaves me wondering whether the electorate really will punish them by voting them out of power in two years. That they should is beyond question. Whether they actually will, is the real question. There’s no doubt the best efforts of President Cyril Ramaphosa – were he to suddenly don an overtly capitalist hat and risk his future over the next two years – could not begin to repair the wholesale destruction that has happened, laid out in terrifying detail here. The evidence of gross negligence is overwhelming. The ignoring of top-level warnings about maintenance and repair, which began over 16 years ago and have now grown to a crescendo, seems to defy human reason. As Johannes Wessels of the Enterprise Observatory of South Africa concludes, the only explanation is that the ruling party’s focus has been (and remains), on self-enrichment rather than on service delivery, as testimony before the Zondo Commission made clear. – Chris Bateman

Will the decayed economic infrastructure be the Achilles’ Heel of the ANC Government?

By Johannes Wessels

As Eskom struggles each day against the odds to keep electricity flowing, readers of online publications are treated to a multitude of articles on the SA Government’s most effective achievement: the destruction of the country’s economic infrastructure. 

A compendium of recent achievements includes:

  • Potholes in South Africa increased from 15 million to 25 million in five years.
  • Johannesburg, the economic powerhouse of the country, experiences a water crisis. Some suburbs were without water supply for up to three weeks and the sound of slowly filling toilet cisterns has become a source of joy and celebration. This despite the Vaal Dam being 90% full and the Sterkfontein Dam that feeds Vaal Dam at full capacity.
  • In 2021, coal exports through the privately developed and owned Richards Bay Coal Terminal (RBCT) was a mere 58.7 million tons, the lowest since 1996 and far below the design capacity of 91 million tons. The constraints were because of cable theft and the poorly maintained rail tracks of Transnet that resulted in mined coal not reaching the export terminal despite a massive international demand.
  • Despite South African ports efficiency levels being far below the global average and constantly declining, the National Port Authority’s latest report indicates it was unable to implement essential capital expenditure projects, spending less than 50% of the R39.8 billion destined for port improvements. 
  • Several of Durban’s previously famous blue flag beaches have been turned into salty sewage soiled stretches and untreated sewage still flows into the Vaal Dam at Deneysville.
  • Local authorities not maintaining their water distribution networks have lost water to the value of R9.82 billion in a single financial year.

(This is a condensed version of an article first published here)

Like a Moses pleading with Pharaoh

The demise of our economic infrastructure has been long in the making. There were numerous technical reports and warnings by professional bodies and experts that under-investment in infrastructure and insufficient maintenance would result in too little electricity-generating capacity, heavily polluted rivers and major constraints in logistics. 

The SA Institute for Civil Engineering (SAICE) warned in 2006 in its Infrastructure Report Card (IRC) that “whilst South Africa’s built environment infrastructure is very good, even world-class in places, the relatively poor overall grade reflects extensive maintenance and refurbishment backlogs, caused primarily by funding and skills shortages”. The following SAICE IRCs of 2011 and 2017 conveyed the same message, but the tone got shriller: “The below-average grade reflects the continuing low maintenance levels and even neglect in many areas. A lack of commitment to long-term planning, adequate dedicated funding, proper management systems, data collection and skill deployment are major contributing factors…

The government and senior officials, however, turned a deaf ear again. 

Dr Anthony Turton, a water specialist, warned in 2008 that the country’s water resources were, through neglect, becoming less safe and that mismanagement of water resources would constrain economic development and could even provoke civil unrest. He was, amid a furore in government circles, suspended by the CSIR.

Warnings also came from the office most ignored by the government, namely the Office of the Auditor General. In the Consolidated General Report on the Local Government Audit Outcomes MFMA 2015–16, the AG warned that:

  • more than 50% of municipalities responsible for water provision did not have basic policies and plans to ensure the maintenance of water infrastructure;
  • 34% of municipalities did not conduct conditional assessments of the infrastructure to inform maintenance plans and budgets;
  • 24% of municipalities did not budget anything for maintenance; and
  • in 41% of municipalities, water losses exceeded the norm with an average water loss of 52% (more than half). 

In the most recent Consolidated General Report on Local Government Audit Outcomes MFMA, the AG repeats this same message: “lack of infrastructure and inadequate maintenance not only negatively affect service delivery, but often cause harm to communities and the environment”.  The AG found that against an acceptable norm of 15%–30% for water distribution losses, the average water loss across the country stood at 50%. Altogether, 84% of the 114 municipalities that are water services providers incurred water distribution losses for the book year, totalling R9.82 billion. 

The value of municipal infrastructure assets that should be maintained and safeguarded amounts to R491.70 billion and annual asset maintenance plans should be in place. “The National Treasury dictates that municipalities should spend at least 8% of the value of infrastructure assets on the repair and maintenance of those assets. However, the total spending on repairs and maintenance across all municipalities amounted to R16.82 billion, only 3% of the value of infrastructure assets.” 

The AG was particularly concerned that 40% of all municipalities spent 1% or less on repairing and maintaining their infrastructure assets (the accepted global benchmark is around 6%–7%).

These warnings went unheeded and, in the instances where remedial reaction eventually followed, it happened only after the horses had bolted. By consistently ignoring these warnings, government deliberately neglected the investment requirements for both expanded demand owing to a growing population and the maintenance to sustain existing economic physical assets. It reminds one of a Pharaoh who closed his ears to the pleas of Moses and Aaron. 

Deliberate under-expenditure

StatsSA’s reports on Public Sector Capital Expenditure illustrate the extent of this neglect. Figure 1 below depicts public sector capital expenditure from 2006 to 2021.

Figure 1:  Based on StatsSA data

In financial year 2021, public sector capital expenditure (report released by StatsSA on 27 October 2022) was at a lower level than in 2012. But the peaks of public sector expenditure in excess of R220 000 million per annum from 2013 to 2019 is no reflection these funds were well spent. Billions of these were siphoned off through Eskom, Transnet, the SABC, the Department of Water Affairs and the range of national, provincial and local authorities to enrich cadres under the pretext of enhancing the economic infrastructure. 

The government cannot claim ignorance in light of all the data and warning signals. The only explanation is that its focus was on self-enrichment rather than on service delivery, as testimony after testimony before the Zondo Commission had made evident. 

A prophet is not honoured in his own land

One of South Africa’s foremost experts on infrastructure asset management and maintenance, Grahame Fogel, confirms the government and senior public-sector management are almost tone deaf for messages about asset integrity and asset maintenance, almost “as if there is a complete contempt for the future”.

Fogel was involved in the working committee of the International Standardisation Committee (ISO) developing the ISO 55000 standards for asset management. ISO 55000 is the international set of standards most widely adopted and implemented of any set of standards developed under the auspices of the ISO. Fogel’s asset management expertise was sought by clients in more than 20 countries and include clients like Chevron, Pfizer, Anglo American, American Electric Power, Rio Tinto, Ford, AstraZeneca and Equinor. 

Fogel consented to be interviewed in his personal capacity, stressing the views he expresses are his own and not necessarily those of the organisations or the profession he is involved in. His erstwhile consulting firm had a contract to implement ISO 55000 asset management procedures at Medupi and Kusile, but the contract was cancelled by senior leadership in Eskom. “My messages on the correct approaches to asset maintenance to both the government and senior leadership within the state-owned enterprises fell on deaf ears. It was as if the technical expertise was considered a component of some neo-liberal fallacy or old colonial relic.”

At leadership and senior management levels, the public sector effectively rejects the only scientifically engineering approach to asset management. “The South African lived experience of infrastructure decay and inefficiencies is there, whether one lives in a deep rural area or in the Houghtons of the cities. Electricity and water supply and quality is threatened, roads are dangerous because of disrepair, rivers are polluted due to no or wrong management of sewage plants.

We are as a country beyond the stage where government leadership will address these problems. At least 6%–7% of the value of infrastructure is required to ensure effective maintenance. All the authorities, from national level to local level, are cutting on these costs. The auditor general in some reports indicated that funds for capital expenditure were misused to pay civil servants’ salaries.

Our only hope to stop the rot is to strengthen the position of those middle managers in the technical departments whether at Eskom, Transnet, national departments or local authorities that are acquainted with and skilled in the asset management. They are often constrained by hierarchical preferences that are regularly prioritised over essential capital investment. The competent engineers and technicians should be bolstered by a growing public consensus that things cannot continue as before and they must speak out more boldly against their political overlords. 

“The consensus opinion that old infrastructure is naturally unreliable is totally incorrect. There are many examples around the world where, for example, old power plants such as Eskom’s are performing well. 

“The maintenance and asset engineering profession of the country has always been held in high esteem internationally. Our skills base and experience is sought internationally. But in one’s own country, the prophets of scientifically based asset management approaches are ignored and rejected,” Fogel says.

How the economy is sabotaged

The government’s persistent neglect of economic infrastructure coupled with the inability of the SAPS to protect public infrastructure like rail tracks, stations, rolling stock, power stations and roads, portrays an attitude of anti-growth and an unwillingness to enable the private sector to create job opportunities. 

Maritime trade volumes are an excellent proxy for GDP changes (Figure 2): when trade blooms, economies grow and when volumes decline, economies suffer. Therefore, the incapacity of the National Port Authority to spend more than 50% of the capital allocated for upgrades of our ports, coupled with the stifling monopoly of incompetence that is reflected in the gross harbour inefficiencies are crippling the economy. 

The slide downwards from the top league of higher middle-income countries expressed as per capita GDP continues unabated. South Africa is destined to become entrenched as a lower middle-income country. The government is successful not in redistributing wealth, but in redistributing poverty.

While the extra unbudgeted income, thanks to high commodity prices, provided a lifeline for the government in the recent Medium-Term Expenditure Framework announcements, things could have been so much better: the Minerals Council estimate mining companies had forfeited at least R35 billion in lost revenue owing to rail capacity constraints. 

In 2021, with population growth, the public sector’s capital expenditure per capita was 15% lower than in 2012. It boils down to neglect of the needs of the population.

The government has caused the demise of SA’s infrastructure with immense damage to the population and the economy. The question now is whether this decayed infrastructure will take revenge and exact its toll, causing the demise of the government that oversaw its destruction.