VIJAY NAIDOO: Good Business Basics – Industry has moved on, taking destiny in its own hands
"The upshot of this development is that many industrial users will never return to using Eskom as a prime supplier, should they ever be able to overcome their current challenges, impacting severely on their revenue streams."
I believe that we have reached a ‘tipping point’ in the provision of infrastructure, particularly that of transport, water and energy.
Industry across all sectors of the economy have lost patience, and all confidence in the ability of the State to correct the situation.
As a result, they are actively seeking ways to mitigate the risks to their operations, and more importantly their earnings.
All of these mitigating actions present a real and present danger to the economy.
Take for example coal major Thungela Resources recent acquisition of a coal miner in Australia for around R4bn.
While the usual ‘corporate speak’ uttered by the CEO, July Ndlovu such as ‘balancing the group’s price exposure’, and the pursuit of ‘geographic diversification’, the not so subtle subtext is clearly evident in other parts of his statement which refers to Australia’s ‘reliable and well established port and rail facilities’.
The impact of Transnet’s dismal performance on Thungela’s and other major miners such as Samancor’s earnings has been well documented.
And even though Ndlovu claims that the acquisition would have happened ‘irrespective of Transnet’s troubles’, the bitter truth is, that R4bn of investment has been lost because our logistics infrastructure is falling apart.
Then we have the citrus industry, currently a R30bn contributor to the economy.
Justin Chadwick, CEO of the Citrus Growers Association of SA (CGASA), writing in the Business Times of April 16, outlines the potential for the industry to generate an additional R20bn in export earnings, and 100 000 new jobs, provided the State comes to the party in substantially improving the part of the logistics system that falls under their ambit, namely ports and rail.
He mentions the billons of rands invested by growers and state of the art cold storage and packhouse facilities to keep product in top condition, that all comes to naught when they meet the ‘……crumbling rail system, and operational issue at the ports’.
He quotes a statistic that only 3000 out of a potential 100 000 containers were transported to the Durban port by rail, resulting in over 95% of fruit exports being forced to use road transport resulting in greater port and road congestion, and damage to fruit in transit.
Turning to electricity, and water, with the legislation finally in place for economic levels of self generations by business, massive investment is being directed to ‘go off grid’ via alternative, mainly green energy sources.
This push for the creation of sustainable energy sources has diverted billions that could potentially have been used in other areas of their operations to, perhaps increase capacity or diversification into new product lines.
The upshot of this development is that many industrial users will never return to using Eskom as a prime supplier, should they ever be able to overcome their current challenges, impacting severely on their revenue streams.
The simple fact is, that it does not take an economics degree to see the damage that the disdainful inaction by the State, and ruling party in addressing the infrastructure challenges, 20 years in the making, has had on the economy.
Alas, the sudden flurry of appointments projects and task teams announced by the President is very much a little too late.
Industry has moved on, taking destiny in its own hands.
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