South Africa begins to gradually loosen its strict coronavirus lockdown on Friday, allowing some industries to reopen after five weeks of restrictions that plunged its struggling economy deeper into turmoil.
The lockdown has had a devastating impact on the economy, but a top government adviser on the pandemic said it has slowed transmissions.
"The lockdown has had quite an effect," infectious disease epidemiologist Salim Abdool Karim told AFP.
"We have got quite clear evidence that we have flattened the curve and that the number of cases we are seeing - and the number of infections probably occurring - has declined quite substantially," he said.
The country's number of confirmed infections has risen to 5 647 since 5 March when the first case was detected. It also has recorded Africa's highest Covid-19 death toll, with 103 fatalities.
The economy of Africa's most industrialised nation was already teetering when the lockdown kicked into gear on 27 March to contain the spread of infections.
To combat the economic destruction, the government has adopted a gradual and phased approach to reopen the country from 1 May.
Around 1.5 million workers in selected industries return to work in the next phase under strict health conditions, according to Trade and Industry Minister Ebrahim Patel.
Cooperative Governance Minister Nkosazana Dlamini-Zuma warned "companies that breach regulations will be forced to close".
President Cyril Ramaphosa took the decision to stagger the easing of the lockdown restrictions in a bid to strike a balance between protecting public health and the economy.
"Our people need to eat. They need to earn a living," Ramaphosa said.
"Companies need to be able to produce and to trade, they need to generate revenue and keep their employees in employment."
South Africa's economy was in recession and reeling from low growth and high debts before the pandemic arrived.
On Wednesday S&P downgraded the country's credit rating further into junk.
After shrinking in the second half of 2019 due partly to severe rolling power blackouts, "South Africa's already contracting economy will face a further sharp Covid-19-related downturn in 2020," the ratings agency said.
To help cushion companies and individuals, Ramaphosa last week unveiled an unprecedented R500 billion economic stimulus and social relief package, amounting to about 10 percent of the GDP.
Finance Minister Tito Mboweni said the country will seek coronavirus relief aid from the International Monetary Fund and the World Bank, where it is eligible for up to $4.2 billion.
An industry body that represents 320 member organisations in the solar PV industry has written an open letter to President Cyril Ramaphosa, in which it calls on him to remove limitations to private power generation as a way of supporting efforts to kick start the economy post COVID-19.
The letter, by the Chairperson of the South African Photovoltaic Industry Association Mr Wido Schnabel was sent this morning (Tuesday 28 April 2020). In his letter, Schnabel writes:
“We are living in unprecedented times when our economic systems, our relationship with nature and our resilience as a global community are tested — all at once. We commend you Mr President, on the leadership you have shown and the difficult decisions taken to delay the spread of Covid-19, hopefully giving our healthcare systems enough time to prepare for a peak in infections.
Tough yet necessary restrictions on trading, social gatherings, and travel have dealt a massive blow to our fragile economy. To recover from the economic impact of the pandemic, we agree with you Mr President that we need a “new social compact” to “forge a new economy”. We agree that “we can no longer work in the way we have before” and it’s time to “adjust to a new reality”. We stand with you in your resolve to build an inclusive economy. In order to achieve this goal, we call on your government to relax certain electricity regulations that have made it difficult for businesses in our sector to grow and create jobs.
Our economic recovery depends on the sustainable, affordable and reliable supply of energy. If we are to –– as you say –– “forge a new economy” then we cannot allow a return to the dark days of load shedding. Since the rolling blackouts of 2008, Eskom’s inability to provide a stable supply of power has throttled economic growth and battered the country’s credit rating to junk status, siting energy as the number one contributing factor.
Mr President, let us use this opportunity to fix yesterday’s problems, starting with our electricity supply woes. As an industry, we support both the state-run utility model and the integration of Distributed Generation methodologies, although the latter delivers electricity at a faster rate with no cost to the Government. The Distributed Generation approach provides additional capacity to the grid, promotes broad-based participation in the energy sector, and aligns with the tenets of a just energy transition. In fact, the Distributed Generation space plays a strategic role in balancing the country’s sustainable development needs with employment security.
To assess the potential of the sector to create jobs, we partnered with the Council for Scientific and Industrial Research (CSIR). According to our study, there are approximately 400 SMMEs (and growing) in the Distributed Generation space with the potential to create more than 100 000 jobs over the next 10 years. Unfortunately, the growth of the Distributed Generation market has been stymied by three factors linked to Schedule 2 of the Electricity Regulation Act (ERA). These problematic amendments came into effect in 2017.
There are three main issues:
Under normal circumstances, NERSA can take more than four months to process applications for registration; licensing can take between six months to a year, despite the 120 day period described in the Act. As a consequence, many companies are incentivized to reduce the size of their projects to avoid a lengthy application process.
Although we support the goals of the ERA, the legislation’s generation licensing requirement does little to ensure that connections to the network are safe and orderly. In fact, there are other legal mechanisms in place to regulate the operation of electricity infrastructure. For instance, over and above the distribution code, most municipalities would have established electricity by-laws to protect their local networks. In addition, the Department of Mineral Resources and Energy (DMRE) has a registration system to determine how many megawatts of Distributed Generation are allowed to enter the network.
The limitations imposed by Schedule 2 of the ERA are weighing heavily on our industry at a time when the country is in the midst of a crisis. Nevertheless, we are confident that by working together with the Government, we will be able to power the economy back to life. This is precisely why we are calling for an urgent meeting with your administration to plot a way forward.
Mr President, we urge you to consider the following proposals:
Mr President, we need urgent interventions from your government to drive growth in the energy sector. The Solar PV Industry stands with you to fight the COVID-19 pandemic and commits to positively participate in the recovery of the economy. As an industry we’ll continue to engage with you so that we can get our economy moving again.”
Former President de Klerk's denial that apartheid was a crime against humanity is cause for reflection on Freedom Day.
Freedom Day, celebrated every year on April 27, commemorates South Africa's first democratic election in 1994 - the first time in the history of the country that non-white citizens were allowed to vote.
That election saw Nelson Mandela replace Frederik Willem (FW) de Klerk to become South Africa's first Black president. Mandela's liberation movement-turned-political party, the African National Congress (ANC), meanwhile took the reins from the white nationalist government that had been in power since 1948. All this transpired without the bloodshed many feared would take place.
In the years that led up to those elections, while Mandela was the face of Black forgiveness, de Klerk became the face of white compromise. In 1990, he took the step of unbanning the ANC and freed Mandela from 27 years in prison. He also agreed to the negotiations that would see the peaceful transition from racist rule to democracy.
It was, therefore, shocking to many when, on February 2 this year, de Klerk publicly stated that apartheid was not a crime against humanity in an interview with the national broadcaster, the SABC.
During the interview, de Klerk said he was "not fully agreeing" with the presenter who asked him to confirm that apartheid - the legalised segregation of and discrimination against non-white people - was a crime against humanity.
Immediately afterwards, the FW de Klerk Foundation supported his statement and published a response that read: "Deplorable as it is, we cannot, from a legal point of view, accept that apartheid can in this manner be made a crime against humanity."
There was an immediate public outcry as well as criticism from the media and other politicians.
Apartheid was so immoral in its conception and so devastating in its execution that there is no South African living today who is not touched by its legacy.
PRESIDENT CYRIL RAMAPHOSA
South African President Cyril Ramaphosa called de Klerk's comments "treasonous".
"Apartheid was so immoral in its conception and so devastating in its execution that there is no South African living today who is not touched by its legacy. I would say that to deny this is treasonous," he said.
Although de Klerk later retracted his statement, the debacle opened old wounds and raised questions about his legacy and the extent to which white South Africans have acknowledged the severity of apartheid.
'We are never seen as human'
"For me and my family, de Klerk's denial of apartheid being a crime against our humanity really hit home quite hard," said Lukhanyo Calata, whose father, Fort Calata, was one of the "Cradock Four" - a group of activists murdered by apartheid security police in 1985.
"[The comments] reinforced our belief that de Klerk has never really seen us as human beings. He's never assigned any human value to our family," he told Al Jazeera.
In its response to de Klerk's statement, the Economic Freedom Fighters (EFF), an opposition party that has called de Klerk an "apartheid apologist" who "has blood on his hands", confirmed it would pursue a murder inquiry into state-sponsored killings that de Klerk had allegedly organised. The organisation also called for de Klerk to be stripped of his Nobel Peace Prize, which he received together with Mandela in 1993, for their collaboration in ending apartheid.
De Klerk, born in 1936, is from a conservative Afrikaner background. His father, Jan de Klerk, was a minister in the cabinet of South African Prime Minister Hendrik Frensch Verwoerd - the man widely regarded as the architect of apartheid.
For decades, FW de Klerk was a committed supporter of apartheid. Elected as a member of Parliament in 1972, he held the ministerial portfolios of mines and energy affairs, internal affairs, and national education and planning. During his time as a cabinet minister, he was considered more conservative than many of his ministerial colleagues.
Ferial Haffajee, a South African journalist, wrote that her abiding memory of de Klerk during apartheid was of the man who passed the university bills that sought to make it more difficult for black people to gain access to white universities.
So it came as a surprise to many when de Klerk announced in Parliament on February 2, 1990, that he would unban the ANC and release Mandela.
The 'myth' of the liberator
In the decades since, many have asked whether de Klerk's U-turn from his conservative past was the result of pragmatism or of a sincere conviction that apartheid was morally wrong.
"De Klerk attempted to hold himself aloof from apartheid crimes against humanity, as did many others who were aware of the illegal and extrajudicial acts of the government," South African journalist Marianne Thamm told Al Jazeera. "By convincing himself he did not know of the gory details, he was able to pass himself off as a relatively 'untainted' and 'progressive' leader."
On the difference between de Klerk and Mandela, Thamm writes: "De Klerk's heart, a heart that has grown the carapace of the consummate pragmatic politician. And that was the singular and unique magic of Nelson Mandela, he revealed his heart while at the same time keeping his head - the mark of a true statesman."
Referring to the "myth" that de Klerk was a liberator, Haffajee writes: "Not then and not now have a generation of us bought into the myth, so his statement, now retracted, that apartheid was not a crime against humanity was hardly surprising to many of us."
Apartheid as an international crime
From 1952 to 1990, apartheid was condemned annually by the United Nations General Assembly as contrary to the Charter of the United Nations.
The 1973 Apartheid Convention required states to both suppress and punish acts of apartheid. At the time of the signing of this Convention, the South African government ignored it.
The inclusion of apartheid in the 2002 Rome Statute of the International Criminal Court was the strongest acknowledgement yet that apartheid was an international crime. It defines apartheid as inhumane acts of a character similar to other crimes against humanity "committed in the context of an institutionalized regime of systematic oppression and domination by one racial group over any other racial group or groups and committed with the intention of maintaining that regime".
Christopher Gevers, senior lecturer at the University of KwaZulu-Natal, is critical of the trade-off that South Africa's democratic government made through the country's Truth and Reconciliation Commission (TRC) because he saw that it meant truth came at the expense of justice.
"Twenty-six years on, not only have we failed to prosecute those who blatantly refused to prosecute the bargain, but the promised 'truth and reconciliation' is wearing thin," he said to Al Jazeera. Gevers points to the fact that the crime of apartheid has never been prosecuted in South Africa or anywhere else in the world.
De Klerk's comment came at a particularly difficult time for South Africa.
As Nobel laureate and former archbishop of Cape Town, Desmond Tutu, said in his foundation's statement on February 16, South Africa "is on an economic precipice. It is beset by radical poverty and inequity. Those who suffered most under apartheid continue to suffer most today."
February was not the first time de Klerk was criticised for his public statements on apartheid.
He initially apologised for apartheid on April 29, 1993. That apology was widely regarded as inadequate, since it did not disclose de Klerk's personal participation in apartheid crimes.
Subsequently, during his testimony to the TRC in 1997, de Klerk described his initial apology as an "unqualified apology". He pushed back against those who attacked it as an attempt to defend or justify the policies of the past.
Leon Wessels, a cabinet minister during de Klerk's presidency, told Al Jazeera: "The de Klerk that appeared before the TRC was a jurist and an intellectual. De Klerk did not seem to be emotionally present."
Veteran journalist Max du Preez found it particularly disappointing that de Klerk never asked for forgiveness before the TRC.
Political commentator and academic William Gumede believes one reason for the strong outcry after de Klerk's February statement is the opportunism of the populist left, represented by the EFF. He said the current climate is "particularly inflammable". Like Tutu, Gumede also believes the difficult economic situation means poorer South Africans are particularly disgruntled.
"We haven't had an official state apology. An apology would give recognition to suffering," said Gumede.
Christi van der Westhuizen, an associate professor at the Centre for the Advancement of Non-Racialism and Democracy at Nelson Mandela University, believes the recent outcry is indicative of a reaction to the hardening of white attitudes in recent years.
"These attitudes can, in turn, be relayed to the ANC government's 'lost decade' due to grand scale corruption," she said.
She believes the denial of the severity of apartheid constitutes apartheid denial. "There is an obfuscation of the dehumanisation of marginalised groupings under apartheid," she said.
This history in its fullness has not yet been told. And the damage wreaked on the lives of millions of South Africans over a sustained period of time ... and the ramifications of this on generations, is still here with us.
MARIANNE THAMM, JOURNALIST
Journalist Thamm told Al Jazeera: "The outcry this year is because there is much unfinished business and there will never be resolution. Enough evidence emerged at the TRC of the murder and savagery of the apartheid state."
Thamm believes de Klerk's denial was indicative of a more general unwillingness on the part of white South Africans to recognise the severity of apartheid.
"This history in its fullness has not yet been told. And the damage wreaked on the lives of millions of South Africans over a sustained period of time, to be dispossessed, to be rendered a 'nothing' legally, and the ramifications of this on generations, is still here with us," she said.
'Confusion, anger and hurt'
Two weeks after de Klerk said apartheid was not a crime against humanity, he retracted his statement, after Tutu asked him to.
Speaking through his foundation on February 17, de Klerk declared apartheid "totally unacceptable" and conceded that the UN had previously highlighted that the era was indeed a humanitarian offence. He said he was sorry for causing "confusion, anger and hurt" with his words.
In spite of the subsequent retraction, de Klerk's denial of the grave and systematic abuses of apartheid has left a scar.
According to Calata, who lost his father to the apartheid state apparatus, "an apology should come out of de Klerk's mouth. It should not appear on some lifeless piece of paper that was most probably not even written by him. So, for me, there's no satisfaction, as there was no apology."
As journalist Tony Heard writes: "Doubts linger after such incidents, for anyone interested in the future social stability of South Africa."
SOURCE: AL JAZEERA
South Africa’s President Cyril Ramaphosa said on Thursday the government will allow a partial reopening of the economy on May 1, with travel restrictions eased and some industries allowed to operate under a five-level risk system.
Ramaphosa said the National Coronavirus Command Council decided restrictions will be lowered from level 5 - the strictest lockdown stage - to level 4 from next Friday. International borders will remain closed while travel will be only allowed for essential services.
“We cannot take action today that we will deeply regret tomorrow, we must avoid a rushed reopening that could risk a spread which would need to be followed by another hard lockdown,” Ramaphosa said in a televised address.
South Africa has spent nearly month under restrictions requiring most of the population to stay at home apart from essential trips, leaving many struggling without wages and short of supplies.
The country has recorded 3,953 confirmed cases including 75 deaths with 143,570 people tested for the virus. Thursday saw the highest one-day leap in infections with 318 new cases, though the health ministry said this was largely due to intensified screening.
“We have to balance the need to resume economic activity with the imperative to contain the virus and save lives,” Ramaphosa said.
He did not give details, as expected, on the 500-billion rand ($26 billion) rescue package he announced on Tuesday. But in the speech he said it was a priority to get the economy restarted and that testing would continue to be ramped up while social distancing rules remained in place.
Under the “risk-adjusted” system, authorities will identify which sectors can operate under various risk scenarios.
“We will implement what we call a risk-adjusted strategy, through which we take a deliberate and cautious approach to the easing of current lockdown restrictions,” said Ramaphosa.
South Africa’s President Cyril Ramaphosa announced an R500 billion ($26bn) stimulus package to deal with the devasting economic impact of COVID-19 and a 35-day lockdown.
He said the money would come from its adjustment budget, the Unemployment Insurance Fund and multilateral institutions.
The World Bank, the New Development Bank, the International Monetary Fund and African Development Bank have been approached for funding.
Measures introduced to assist the economy include:
A phased approach will be taken to reopen the economy of which Ramaphosa said he will address the nation on Thursday.
South African President Cyril Ramaphosa has announced plans to reduce his administration’s fiscal distress, with a decision to cut thousands of telecommunications jobs.
Indirectly employed by the government through one of its many state-owned enterprises (SOEs), cutting 3,000 jobs represents the beginning of promised steps to return South Africa to economic sustainability.
Two decades ago, Telkom, South Africa’s state-owned giant, was the largest by infrastructure development and most sophisticated on the continent.
Like power-producer Eskom and many others, Telkom is a shadow of its former self and struggling to make ends meet.
The cause has been a combination of prescribed “black economic empowerment” through the deliberate preference for formerly disadvantaged people and of the ruling African National Congress’ (ANC) leftist policy of cadre deployment.
Often these two processes have overlapped but they have meant that highly skilled people have had to give way to replacements.
While a fair number of such appointments have worked out, many have not.
This has affected national, provincial and local governance — and is one of the reasons there has been mounting unhappiness in communities lacking basic services, leading to protests.
In the vital SOEs, which dominate the economy and which are effective monopolies, the governance failure and accompanying corruption have run rampant and caused collapses or near-collapses requiring state bailouts.
But there is no more money for such bailouts and South Africa cannot borrow any more without the entire sovereign debt of the country falling into ‘junk’ status.
In an address to the ANC rank and file last weekend, Ramaphosa made it plain that in providing service directly or indirectly through employment in SOEs, accountability would be the watch word.
According to international ratings like the World Bank and IMF, the government and its SOEs are around 10-15 per cent overstaffed.
However, Ramaphosa’s union allies hate the idea of retrenchment.
Combined with residual elements involved in former president Jacob Zuma’s “state capture” project of looting, the unions say they will not let Ramaphosa do what he must.
They are trying, through the Congress of South African Trade Unions, to halt any retrenchments. They also want Eskom removed from SOE minister Pravin Gordhan’s control.
However, the unions have the recent experience of South African Airways (SAA) to consider.
Strike action by ANC-aligned unions grounded planes for days — long enough to win the pay increase the unions were demanding, but also to throw the broke airline into a terminal crisis.
SAA is in business rescue at Ramaphosa’s insistence. With a deadline this weekend for it to find $139 million to remain operational, the airline may be liquidated.
If so, thousands of jobs will be lost, rather than perhaps hundreds if rescued.
The unions, having won the battle for an increase, pushed the airline to the edge and may have lost the war in terms of jobs.
SOUL OF ANC
At the core of ANC’s internal disputes about what to do to rescue the economy are divergent views.
The issue lies between the business-friendly lobby in ANC led by Ramaphosa, and those inclined to a hardline socialist agenda.
The result is a war over jobs which has become the proxy battlefield for the real struggle under way, being that for the heart and soul of the ANC — and therefore of the future of South Africa.
This week, Gwede Mantashe — once a leading unionist and currently ANC chairman and a minister — has been saying things directly contrary to Ramaphosa about getting South Africa out of the power-generation crisis.
The country is broke and faces costly ratings downgrades if it does not cut government jobs.
Consequently, Ramaphosa and his team are acting. Some 129 cases related to corruption have emerged from Eskom alone, and have gone for prosecution.
More than 1,000 internal disciplinary cases are in the process within the power producer.
The question is whether Ramaphosa can do enough against the backdrop of a weakening global economy to prevent a meltdown.
And then there is a crucial local government election a little more than a year out.
How the struggle for power and for control over ANC — and therefore over South Africa’s destiny — plays out will tell if the country becomes a failed state or emerges as a shining example of a modern developing nation, as Ramaphosa promised.
On the eve of the statement marking the 108th birthday of the governing African National Congress (ANC), South Africa’s finance minister Tito Mboweni tweeted:
If you cannot effect deep structural economic reforms, then game over! Stay as you are and you are downgraded to Junk Status! The consequences are dire. Your choice…
Similar sentiments have been voiced by many well respected commentators concerned about the state of South Africa’s economy as well as its politics – and the ability of the ANC to provide effective leadership to address the major challenges it faces.
South Africa faces perhaps many more challenges than it did in the build up to the new constitution of 1994. These include a moribund economy and a governing party that is faction-ridden and ideologically disorientated. This is blamed for enabling much of the massive corruption and nepotism in the country best described as “state capture”.
What South Africa needs is a reformer who can redirect its politics to address issues related to economic growth and development, political stability, social cohesion, service delivery and several issues related to governance, management and administration.
It should all start with President Cyril Ramaphosa and the ANC, which he leads. He had the opportunity to set the tone this weekend when he delivered the ANC national executive committee’s January 8 statement to mark the party’s birthday. Such statements are viewed as being important because they provide direction for cabinet discussions ahead of the new legislative sitting of parliament as well as the state of the nation address delivered in February every year by the President.
Ramaphosa was expected to lay out the political direction for South Africa during 2020. Unfortunately, his speech failed to hit the mark. It didn’t offer any radical new ideas on the structural reforms hinted at by Mboweni. Ramaphosa showed a complete lack of party as well as political leadership. His inability to be bold and decisive about what needs to be done suggests that he is increasingly becoming a victim of his own party’s inability to deal with the difficult circumstances of the current negative state of affairs in the country.
What was missing
There was nothing new in the speech outside of the existing policy and strategy of the ANC. The core of his presentation were the usual talking points about rebuilding the state, reinforcing the state-owned enterprises, the battle against corruption and state capture, social cohesion, and economic growth and development.
Despite an emphasis on making state companies, specifically the power utility Eskom work, and making progress with land reform, no fresh proposals were made. More rhetoric, a lack of strategic vision and political survival at all costs seems to be the name of the game.
This is a far cry from what’s needed.
Even more difficult times lie ahead for Ramaphosa. His promise that this year will see decisive action against those implicated in widespread corruption – among them influential party leaders – will no doubt add to his precarious position in the party.
The ANC’s 108th birthday bash provided fresh evidence that Ramaphosa faces a very difficult political environment in the party. There were expectations that about 35 000 people would turn up. In the event only 11 500 arrived to hear him deliver his speech. Some party leaders bemoaned the poor attendance.
This shows that, beyond any doubt, 2020 is going to be dominated by the battle for control of the ANC. That battle will gain a lot of momentum towards the party’s national general conference which is due to be held in the middle of this year. The national general conference is held midway between party conferences, to debate the “strategic organisational and political issues facing the movement”.
There are already those who are already beginning to shows signs of mounting a challenge against him. These include those implicated in state capture, among them ANC secretary-general Ace Magashule, as well as other disgruntled members of the ANC presenting themselves as a “coalition of the wounded”.
The outcome of this battle will have far reaching implications for the future for South Africa, and its ability to deal with its numerous challenges.
Decisive year ahead
The year ahead promises to be a very difficult but also a very decisive year for South Africa. Is Ramaphosa the man to take the country into a new dawn, or is he going to be the victim of a well-organised campaign to disrupt his intended initiatives?
This year will provide the perspective on the way forward. If strong forces within the ANC get their way, someone other than Ramaphosa will present the January 8 statement in 2021.
For ordinary South Africans, this presents a very difficult scenario, with the strong possibility that the economy will slide into recession.
This, plus amending article 25 of the constitution to enable the expropriation of land without compensation, will result in even lower investment levels, higher levels of political instability and bigger challenges in terms of food security.
This does does not augur well for the future of the country and the well-being of its citizens.
Ethiopian Prime Minister Abiy Ahmed on Sunday said he has asked South African President Cyril Ramaphosa to intervene in an ongoing dispute with Egypt and Sudan over Ethiopia's Renaissance Dam.
The filling of the dam has been a source of tension between the Nile countries. Egypt and Sudan argue that Ethiopia has not provided sufficient guarantees to their water supply, which is highly dependent on the Nile River.
All three countries were expected to have finished negotiations ahead of signing a deal later this week. But negotiators say significant issues remain.
"As (Ramaphosa) is a good friend for both Ethiopia and Egypt and also as incoming AU chair, he can make a discussion between both parties to solve the issue peacefully," Abiy said at a press conference in the South African capital Pretoria.
'A solution can be found'
For his part, Ramaphosa said he had accepted the task and that he had already reached out to Egyptian President Abdel Fattah el-Sissi.
"The Nile River is important to both countries and there must be a way in which both their interests can be addressed," said Ramaphosa. "There must be a way in which a solution can be found."
Concerns over the Renaissance Dam on the Blue Nile, one of the main sources of the Nile River, have dogged relations between the African nations for years. At times, Egyptian officials have threatened military action against the dam, including airstrikes, saying its existence poses an existential risk to Egypt.
For Ethiopia though, the dam is a much-needed source of power to energize what has become one of Africa's fastest growing economies.
Ethiopia and South Africa also signed several trade agreements spanning health, tourism and telecommunications industries during Abiy's visit.
South African police said on Thursday they had arrested a number of people, including two former senior managers of Eskom, on suspicion of involvement in fraud and corruption worth 745 million rand ($51 million) at the troubled state-run power firm.
The managers, as well as two business directors and seven companies, are expected to appear in court on Thursday to face the police allegations, which also included money laundering, South Africa’s elite police unit the Hawks and National Prosecuting Authority said in a joint statement.
The individuals, who were not named, were arrested earlier in the day following an investigation into the construction of large projects at two power stations, the statement said.
This revealed “gross manipulation” of contracts between contractors, Eskom employees and third parties at one of them, it continued.
“Eskom continues to work with law enforcement agencies … to root out corruption and malfeasance,” the power provider said in a statement, adding the names of the individuals could not be revealed until they appeared in court.
“We … will leave no stone unturned in ensuring that perpetrators … are brought to book,” it added.
The ailing utility, which provides 90% of South Africa’s power, has been struggling to keep the lights on amid serious financial problems in part stemming from years of mismanagement and alleged graft.
Last week, it had to implement some of the most far reaching planned blackouts in years and is regularly cited by ratings agencies as one of the main risks to South Africa’s economy.
“This is a great milestone in the fight against corruption in our country,” South Africa’s Special Investigating Unit, which was also looking into the allegations, said.
Eskom’s problems are a headache for President Cyril Ramaphosa, who has staked his reputation on fixing ailing state-owned firms and reviving South Africa’s flagging economy.
South African President Cyril Ramaphosa has taken the decision to put South African Airways, the cash-strapped national flag carrier, into voluntary business rescue. Caroline Southey from the Conversation Africa asked Professor Marius Pretorius to explain how the process works.
What is a business rescue?
It’s what is known in the European Union as a pre-insolvency procedure – that means a process that’s designed to save a company from being shut down. All countries have their own version of the procedures that need to be applied when a business is in distress. One of the best known ones is the US’s Chapter 11.
South Africa’s process is set out in Chapter 6 of the Companies Act, which came into effect in 2011. It indicates what needs to be applied when a business is in distress.
What’s the aim?
The aim is to address distress in a business, when it’s not performing. Distress is normally identified when a company is no longer profitable, when it’s not a going concern anymore, when it has major problems. Like a sick person. You have to see a doctor when you’re sick.
The aim is to institute a turnaround – to try to prevent the company from having to go into liquidation, or, in other words, shut down.
In South Africa, a company applies for business rescue under Chapter 6 of the Companies Act. It’s basically a last-ditch attempt to save a business. That’s why it’s called a pre-insolvency process.
It’s understandable that the government is trying to avoid liquidation: if SAA went the route of liquidation rather than rescue, the government would be forced to repay creditors. But in a rescue situation, a moratorium is put on relief payments. Creditors don’t have to be paid immediately. It gives a company a bit of a lifeline while the rescue practitioner works out a plan for the business.
SAA has accumulated unsustainable levels of debt.
When should business rescue be sought?
The act makes a provision for when a business is in financial distress. It’s then obliged to file for business rescue. This would arise, for example, if a company was unable to meet financial commitments due over the next six months. Under these circumstances, the company is obliged to file for voluntary business rescue. Research shows that company directors take the voluntary route 90% of the time. The reason for this is that if they don’t, they could face being delinquent directors, making them liable for the company’s debt.
How is a company placed in business rescue?
The directors file through a procedure under the Companies and Intellectual Properties Commission, which then confirms the appointment of a rescue practitioner and licences him or her. There is a full process of accreditation and set of requirements set by various professional bodies for practitioners. They are usually lawyers, accountants or business people. And there are conditions specifying how much experience they must have had, depending on whether they are senior or junior.
The process of appointing the rescue practitioner can take up to five days. Once appointed, the person takes full charge of the company. That means they have the power to make all decisions, including running the company’s finances.
The main aim is for the rescue practitioner to investigate the affairs of the company and ultimately prepare a rescue plan. They have 25 days in which to do this. But normally the rescue practitioner would call a creditors meeting to inform them that he or she is applying for an extension to that time. The creditors must agree to this.
The rescue practitioner must also meet with the employees.
When the rescue practitioner has drawn up a plan for the business, it needs to be presented to the creditors for approval. They must vote on it. It can only go through if 75% are in favour of implementation. Alternatively, they can ask for revisions which the rescue practitioner is obliged to follow up.
If there’s no agreement, the business must go into liquidation, and be shut down.
But if the plan is agreed, the next task is implementation. There’s no particular timeline for this – it can take anything from, say, six months to four years.
Once the plan has been implemented, the company must apply to the Companies and Intellectual Properties Commission to have its status reversed to being a going concern.
What happens to the directors during the process?
Most of the time it’s the directors that got the business into trouble in the first place by making bad decisions.
They are obliged to support the rescue practitioner in whatever he or she requires. Their co-operation is very important. For example, they must supply him or her with information. But they no longer have any powers to make decisions. They will still be paid – though, depending on the plan, this is where cuts are usually made immediately. But this will depend on the rescue practitioner and the plan.
And the employees?
Employees are unfortunately very vulnerable during the process. Quite often you’ll find that the good employees leave because they can find other jobs. Nevertheless, they are also protected. If the company does go into liquidation they get preference and are the first of the unsecured creditors to be paid from the available money.
The airline is a state-owned enterprise. Has one of these ever been put through this process before?
Not that I know of. I believe that this is why there was so much hesitancy to do it.
In late November the trade union Solidarity, which represents mainly white, Afrikaans-speaking employees, asked the Johannesburg High Court to place the airline under business rescue. The union argued that this was the only way to save the airline.
I think it’s doubtful that the airline can be saved. The question you have to ask is this: is there a business?
As soon as this process starts, the business takes a body blow. Nobody trusts it anymore. Nobody wants to take the risk and book tickets because there’s a high risk they will lose their money.