The Budget: A sack of lemons

HKhambuleAfter eagerly awaiting the delivery of the latest budget speech, by Minister Nene, I must say on the balance of circumstances, Mr Nene has done the best he could do with a sack of lemons. Some of the lemons are ripe and some are just not ready while others should be relegated to the compost heap.

It is important that this budget be looked at through the lens of a young South African person, a digitally wired global citizen, a person who will be between the ages of 40 to 60 by the year 2050. It is one thing to expect the 2015 budget to tackle issues of inequality, poverty and job creation, but it is another to understand that the budget speech speaks to the operationalization of already established and promulgated plans and policies. In this regard Mr Nene made lemonade out of lemons.

My initial response to the budget was that South Africa, and more importantly, the ordinary citizen like myself will have to drink this sour concoction. It is no secret that South Africa is going through structural reforms that are akin to austerity measures. Households are bearing the brunt of these measures. A 1% increase in income tax is not a big deal if households were not already cash strapped from high levels of debt to ever increasing energy costs. The problem also lies in the fact that this 1% increase strikes the middle income earners, more so it affects young professionals who have just entered the job market, notwithstanding, the fact that many young people have student debt that need to be repaid.

In all honesty the use of national revenue needs to be improved. The fact that state owned enterprises have to be consistently bailed out using existing and expected tax revenue is unacceptable. It is something that leaves a sour taste in my mouth. Mr Nene said that tax revenue is the single largest revenue source for the government. Notably income tax makes up a large portion of the said income. This revenue should be used for social development such as the increasing of free basic services and the implementation of universal access to basic services for areas in need. South Africa cannot forget that climate change is happening. South Africa needs to undertake an aggressive adaptation and resilience building programme. Any programmes and initiatives that further social development help alleviate the exposure and risks of climate change.  Such an approach sounds more credible than bailing out the monopolistic electrical utility, an ailing broadcaster or a failing postal service.

The state needs to open up conversations on what can be done with the archaic models of running state owned companies and how they operate. This sack of lemons is fast turning bad.

Electricity

The electricity crisis is one example of a failing system of governance as well as a deteriorating model of service. It has been accepted by many quarters that the electricity tariff needs to be cost reflective, however, the electricity tariff needs to adjust for the majority of citizens who cannot afford the current tariffs.

The temporary increase in the electricity levy is concerning. Why should society pay more for less power and less reliability – even though the increase is said to help in addressing the problem of climate change and increase the revenue for electricity utilities.

An important aspect of the present-day state utility is to have a surplus of money, to maximise profits. This paradigm conflicts with the aim of providing a social service affordably. It is therefore necessary that an increase of social floors takes place. Some low-hanging opportunities in energy efficiency measures such as solar water heaters and structural insulation present immense co-benefits. These measures are important in decreasing energy costs. Thus the allocation for free basic electricity needs to account for modern energy needs by including more efficient alternative sources such as liquefied natural gas for cooking and space heating.

The conversation of electricity needs to include the end use perspective, and not just the supply side. The days of a one-stop shop electricity wholesale delivery for all services are over. The days of Eskom monopolising the sector are coming to an end, and it is important for our leaders to recognise this. Eskom needs to essentially focus on transmission and distribution to a lesser extent. The state utility must bring in other role players and play a coordinating or facilitative role.

The government cannot continue with its sweet and sour approach to energy planning. It is time that it recognised the role of rooftop photovoltaics but more importantly it needs to acknowledge that decentralised energy production is the actual game changer.

The idea that costs of inadequate planning and implementation is passed on to us, to me the ordinary citizen, and ultimately future generation is shortsighted. The state has effectively bailed out Eskom and yet there are measures such as demand side management that suppress demand from energy intensive users. The problem lies in the fact that it is a double-edged sword, as most of these companies pay highly subsidised and unethical electricity tariffs.

Let us not forget that underlying the bail out of Eskom and state companies that provide essential services is the issue of non-payments. I put this beverage to you – is it not more beneficial to bail out the customers, the residents of Soweto and areas alike as well as indebted municipalities, rather than to finance Eskom with an indebted customer base?

This year we seem to have a harvest of lemons, when we are used to harvesting oranges and some bananas, some apples and lemons. I am not particularly fond of the lemons but that’s what we have at this point. What we need to do is sort the lemons out and keep the good ones and use the bad ones for a better more productive purpose. I for one will be around for a while and I am not going to be drinking lemonade for the next decade. Government needs to recognise the diversity of activities that are available to the country. When it comes to energy services there is nothing better than a good old-fashioned fruit salad.

 

 

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