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14 February 2023 | Story Prof Sethulego Matebesi | Photo Sonia Small
Prof Sethulego Matebesi
Prof Sethulego Matebesi is an Associate Professor and Head of the Department of Sociology at the University of the Free State (UFS).

Opinion article by Prof Sethulego Matebesi, Associate Professor and Head of the Department of Sociology, University of the Free State.
A maxim says it is not enough to know that people have made mistakes; we need to understand why they made the mistakes if we hope to prevent them or others from making the same mistakes.

While South Africans are still trying to make sense of the many lofty promises made about measures to deal with the catastrophic energy crisis over the past four years, unsurprisingly, the restoration of energy security also dominated the 2023 State of the Nation Address (SONA).

Still, the reasons behind the failure of past intervention measures and progress with restructuring the state’s energy utility, Eskom, remain a mystery.

There is enough cause for concern over Eskom’s stance that an ageing fleet of coal-fired power stations that consistently break down is one of the reasons for load shedding. What happened to planning? No wonder the need to achieve quick success in resolving the energy crisis has placed a premium on maintaining citizens’ trust. As a result, the government proposed new initiatives to address the insecurity of the electricity supply by declaring a state of emergency to avert a complete blackout and appointing a new Minister of Electricity within the presidency to lead the government’s short-term energy crisis response. 

President Cyril Ramaphosa has already indicated that the criticism of the Minister of Electricity’s position is misguided. In other words, from the government’s perspective, the impact of its decisions does not matter. To South African citizens, however, it matters a great deal as they have borne the burden of load shedding and the rising cost of living. Above all, those who can cushion the blow of the energy crisis will want to see that the maximum value for public money is achieved.

The energy crisis has been the subject of fierce arguments over the past few years. So too, have deliberations on the government’s capability to deal with the crisis. And although the precise impact of the state of disaster, which began with immediate effect after its announcement in the SONA, cannot be determined at this stage, it is not premature to believe that the energy crisis will become a high-stake bidding game during the 2024 general elections. 

From the responses of the African National Congress (ANC) parliamentarians and alliance partners, one gets the sense that they sincerely wish there could have been a less dramatic option for the electricity minister, who has been touted to serve merely as a project manager.

Disastrous decisions are a recipe for catastrophic events

There has never been a time in South African history since 1994 that our presidents have not faced one scandal or another. After having temporarily thwarted the Phala Phala saga and emerging victorious as leader of the ANC at the 55th National Conference in December 2022, one would assume that President Ramaphosa would have assimilated the lessons from past events.

The post-SONA 2023 political landscape points to a challenging year for Ramaphosa. It is a truism that an organisation’s culture is determined by its leader. And since politics is not an exercise in objectivity, it is for this reason that several expected decisions by President Ramaphosa will determine how he will navigate between being regarded as a heroic figure and a victim of political persecution.

Objectively, it is hard not to agree with critics that a state of emergency will open the floodgates of collusion and corruption, which are distinct problems within South African public procurement. At this point, one wonders if this is not yet another gimmick to extend the patronage network of the presidency.

Another major decision facing President Ramaphosa is the much-anticipated cabinet reshuffle. Deputy President David Mabuza’s announcement that he resigned, only to be asked by the presidency to hang on, provides fascinating insight into how difficult it can become to exercise what some may regard as the mundane task of replacing cabinet ministers. And looking at the organisational footprint of the ANC, I reckon President Ramaphosa will avoid a situation where a cabinet reshuffle becomes another political hot potato from within his own organisation.

There is a fierce power war waging within the ANC. As a result, time will tell whether the president will be brave enough to replace poor-performing ministers instead of using proxies such as the new Minister of Energy. 

And to be clear – why we fail to confront underperforming ministers and public servants is a vexing question.

Indications are that there seems to be no aversion to brevity when it comes to political expediency, but to live up to the responsibility of accelerating structural reforms that significantly impact the country’s growth trajectory positively and reduce policy uncertainty. Continuing to routinely neglect these obligations is bound to create a more extensive trust gap between the government and citizens.

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Inaugural lecture: Prof. Phillipe Burger
2007-11-26

 

Attending the lecture were, from the left: Prof. Tienie Crous (Dean of the Faculty of Economic and Management Sciences at the UFS), Prof. Phillipe Burger (Departmental Chairperson of the Department of Economics at the UFS), and Prof. Frederick Fourie (Rector and Vice-Chancellor of the UFS).
Photo: Stephen Collet

 
A summary of an inaugural lecture presented by Prof. Phillipe Burger on the topic: “The ups and downs of the South African Economy: Rough seas or smooth sailing?”

South African business cycle shows reduction in volatility

Better monetary policy and improvements in the financial sector that place less liquidity constraints on individuals is one of the main reasons for the reduction in the volatility of the South African economy. The improvement in access to the financial sector also enables individuals to manage their debt better.

These are some of the findings in an analysis on the volatility of the South African business cycle done by Prof. Philippe Burger, Departmental Chairperson of the University of the Free State’s (UFS) Department of Economics.

Prof. Burger delivered his inaugural lecture last night (22 November 2007) on the Main Campus in Bloemfontein on the topic “The ups and downs of the South African Economy: Rough seas or smooth sailing?”

In his lecture, Prof. Burger emphasised a few key aspects of the South African business cycle and indicated how it changed during the periods 1960-1976, 1976-1994 en 1994-2006.

With the Gross Domestic Product (GDP) as an indicator of the business cycle, the analysis identified the variables that showed the highest correlation with the GDP. During the periods 1976-1994 and 1994-2006, these included durable consumption, manufacturing investment, private sector investment, as well as investment in machinery and non-residential buildings. Other variables that also show a high correlation with the GDP are imports, non-durable consumption, investment in the financial services sector, investment by general government, as well as investment in residential buildings.

Prof. Burger’s analysis also shows that changes in durable consumption, investment in the manufacturing sector, investment in the private sector, as well as investment in non-residential buildings preceded changes in the GDP. If changes in a variable such as durable consumption precede changes in the GDP, it is an indication that durable consumption is one of the drivers of the business cycle. The up or down swing of durable consumption may, in other words, just as well contribute to an up or down swing in the business cycle.

A surprising finding of the analysis is the particularly strong role durable consumption has played in the business cycle since 1994. This finding is especially surprising due to the fact that durable consumption only constitutes about 12% of the total household consumption.

A further surprising finding is the particularly small role exports have been playing since 1960 as a driver of the business cycle. In South Africa it is still generally accepted that exports are one of the most important drivers of the business cycle. It is generally accepted that, should the business cycles of South Africa’s most important trade partners show an upward phase; these partners will purchase more from South Africa. This increase in exports will contribute to the South African economy moving upward. Prof. Burger’s analyses shows, however, that exports have generally never fulfil this role.

Over and above the identification of the drivers of the South African business cycle, Prof. Burger’s analysis also investigated the volatility of the business cycle.

When the periods 1976-1994 and 1994-2006 are compared, the analysis shows that the volatility of the business cycle has reduced since 1994 with more than half. The reduction in volatility can be traced to the reduction in the volatility of household consumption (especially durables and services), as well as a reduction in the volatility of investment in machinery, non-residential buildings and transport equipment. The last three coincide with the general reduction in the volatility of investment in the manufacturing sector. Investment in sectors such as electricity and transport (not to be confused with investment in transport equipment by various sectors) which are strongly dominated by the government, did not contribute to the decrease in volatility.

In his analysis, Prof. Burger supplies reasons for the reduction in volatility. One of the explanations is the reduction in the shocks affecting the economy – especially in the South African context. Another explanation is the application of an improved monetary policy by the South African Reserve Bank since the mid 1990’s. A third explanation is the better access to liquidity and credit since the mid 1990’s, which enables the better management of household finance and the absorption of financial shocks.

A further reason which contributed to the reduction in volatility in countries such as the United States of America’s business cycle is better inventory management. While the volatility of inventory in South Africa has also reduced there is, according to Prof. Burger, little proof that better inventory management contributed to the reduction in volatility of the GDP.

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