Has SA's "Economic Growth" really been that surprising?

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sox63

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I ask this question as yet another sector in our economy is reporting an inability to meet local demand, this time fuel. This due, as they say is lack of refining capacity.

http://www.fin24.co.za/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-25_2137131

Now what I want to know is that, do you guys feel that our "growth" really that unexpected? The lack of planning and foresight across the board is shocking, now all sectors are now playing catch up!

If I use my logic and I was a CEO of a Multi-National Oil company in this case, I would have said to myself pre-1994, Hmmm, so now the majority of people in SA will now not only have access to opportunities but have prefference over the minority that was the major source of their income over the years. Is it not inconcievable that demand would rise sharply?

I would think that it is fair logic to apply? Don't you?

Then why has the lack of investment in infrastructure across all sectors carried on for so long? My only conclusion is that they did not believe SA would be where it is today, maybe they thought we would be involved in some sought of civil war and thought it was too risky to invest. Now they are being bent over and being royally screwed, as the petrol price is regulated in SA and now they have to carry the extra cost importing their fuel.:D
 
sox63 said:
I ask this question as yet another sector in our economy is reporting an inability to meet local demand, this time fuel. This due, as they say is lack of refining capacity.

http://www.fin24.co.za/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-25_2137131

Now what I want to know is that, do you guys feel that our "growth" really that unexpected? The lack of planning and foresight across the board is shocking, now all sectors are now playing catch up!

If I use my logic and I was a CEO of a Multi-National Oil company in this case, I would have said to myself pre-1994, Hmmm, so now the majority of people in SA will now not only have access to opportunities but have prefference over the minority that was the major source of their income over the years. Is it not inconcievable that demand would rise sharply?

I would think that it is fair logic to apply? Don't you?

Then why has the lack of investment in infrastructure across all sectors carried on for so long? My only conclusion is that they did not believe SA would be where it is today, maybe they thought we would be involved in some sought of civil war and thought it was too risky to invest. Now they are being bent over and being royally screwed, as the petrol price is regulated in SA and now they have to carry the extra cost importing their fuel.:D
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You hit the nail on the head. Everyone was just waiting for South Africa to self destruct, and now that the opposite is taking place, they're left with egg on their faces.
 
sox63 said:
Then why has the lack of investment in infrastructure across all sectors carried on for so long? My only conclusion is that they did not believe SA would be where it is today, maybe they thought we would be involved in some sought of civil war and thought it was too risky to invest. Now they are being bent over and being royally screwed, as the petrol price is regulated in SA and now they have to carry the extra cost importing their fuel.:D
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Ah, but is the They you refer to , the ones responsible for upgrading and maintaining the countries infrastructure, not the post 94 government?

I'm sure international businesses would have jumped to build more roads, power plants and communications systems. Look at Congo or Nigeria or even Iraq. Big business doesn't let a little detail like war or civil disobedience stop them for cashing in anywhere. Beside, the private sectors in this country just kept growing and improving. No growing pains there. What does that tell you?

IMO it is the lack of government leadership, planning and proper management that lead to our current situation.
 
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Jozi101 said:
You hit the nail on the head. Everyone was just waiting for South Africa to self destruct, and now that the opposite is taking place, they're left with egg on their faces.
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Perhaps, however, our government made the same mistakes. Both Eskom and Transnet didn't increase capacity for many years. So by that logic, perhaps the government didn't have confidence in itself. Hardly a situation to inspire confidence in investors.

At the same time, statistically, Africa is high risk. One just has to look at other African countries to see this. Most companies would have taken a wait-and-see approach, which while in retrospect looks wrong, at the time would have been the correct decision.

There is nothing like having the benefit of hindsight on your side.
 
Tassidar said:
Perhaps, however, our government made the same mistakes. Both Eskom and Transnet didn't increase capacity for many years. So by that logic, perhaps the government didn't have confidence in itself. Hardly a situation to inspire confidence in investors.

At the same time, statistically, Africa is high risk. One just has to look at other African countries to see this. Most companies would have taken a wait-and-see approach, which while in retrospect looks wrong, at the time would have been the correct decision.

There is nothing like having the benefit of hindsight on your side.
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I guess you did not read my post clearly, I said ALL sectors, including Public. That being said, the only place where goverment would intervene with say the Refinery issue I used in this exaample, would be at the licensing stage for the construction of said refinery. The companies themselves that are responsible for the construction of support infrastructure, i.e. roads and rails. I say this knowing the South African/Mozambican consortium that got the go ahead for the pipeline into Mpumalanga are tasked with constructing that infrastructure.

So with that do you still think Goverment is solely to blame?
 
sox63 said:
I guess you did not read my post clearly, I said ALL sectors, including Public. That being said, the only place where goverment would intervene with say the Refinery issue I used in this exaample, would be at the licensing stage for the construction of said refinery. The companies themselves that are responsible for the construction of support infrastructure, i.e. roads and rails. I say this knowing the South African/Mozambican consortium that got the go ahead for the pipeline into Mpumalanga are tasked with constructing that infrastructure.

So with that do you still think Goverment is solely to blame?
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Hi Sox,

You misunderstood me. It was never my intention to say the government is solely to blame.

My point was to highlight the fact that companies with so-called 'egg on their faces' were making the correct decision based on the information that was available at the time.

The only reason I mentioned government was to illustrate that the government run companies made exactly the same mistakes as the private companies.
 
Tassidar said:
Hi Sox,

You misunderstood me. It was never my intention to say the government is solely to blame.

My point was to highlight the fact that companies with so-called 'egg on their faces' were making the correct decision based on the information that was available at the time.

The only reason I mentioned government was to illustrate that the government run companies made exactly the same mistakes as the private companies.
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Sorry for the mis-understanding. However I partly have to disagree with your statement Public and Private making the same mistake.

With Public, and more specifically Eskom, I remember Goverment was "trying" to encourage Private companies to participate in the energy generation industry. But the plan blew up in Goverment's faces when no one answered that call. IIRC they all wanted guarantees that Eskom would buy their infrastructure should their business go bad. Now obviously this goes agains the very idea of Entrepreneurship, if you don't want to take the risk, then you should not receive rewards.

The rest of the story is well documented, on this forum even.

With all that said, why the massive public outcry, if we understand that those decisions were taken with "information available at the time" (as you said).
 
sox63 said:
Sorry for the mis-understanding. However I partly have to disagree with your statement Public and Private making the same mistake.

With Public, and more specifically Eskom, I remember Goverment was "trying" to encourage Private companies to participate in the energy generation industry. But the plan blew up in Goverment's faces when no one answered that call. IIRC they all wanted guarantees that Eskom would buy their infrastructure should their business go bad. Now obviously this goes agains the very idea of Entrepreneurship, if you don't want to take the risk, then you should not receive rewards.

The rest of the story is well documented, on this forum even.

With all that said, why the massive public outcry, if we understand that those decisions were taken with "information available at the time" (as you said).
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Sox,

You raise a good point about Eskom. I am not sure of the details as to why the plan failed, however, they would not have been able to compete directly with Eskom due to Eskom's economies of scale. However, with the lack of interest shown, government could have and should have responded more quickly.

Transnet certainly didn't invest for a long time, but this could be because it was very badly managed.

The "massive outcry now" is because with the benefit of hindsight we know they were the wrong decisions, and the few people who did decide to invest will be experiencing great returns now.

However, companies who invest in large projects have to invest millions of rands over long periods. They are understandably risk-averse, and will act cautiously. While we are experiencing great growth, SA still faces many risks, particularly that of 'who is going to be the next president, and how are they going to govern the country?'. Businesses must weigh up the cost of investing including the risks involved versus the potential return. Most businesses would have rated the risks for SA as being quite high ten years ago, and thus would have been afraid of investing.
 
Missing the point, a balance sheet looks much better with huge retained earnings and extraordinary dividend issues. These people planned for the short-term, it takes a leader to plan for the long-term. They did not do that.
 
lsuacner said:
Missing the point, a balance sheet looks much better with huge retained earnings and extraordinary dividend issues. These people planned for the short-term, it takes a leader to plan for the long-term. They did not do that.
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Actually, that's the income statement.

Since there is no way of telling whether it was a lack of planning or a calculated decision without looking at internal company documents, we will have to agree to disagree on this one.

I don't think that I missed the point, however. Since I am in the field of business myself, I know well what the rationale behind investment decisions is.
 
Make is the financial statements then, I am in my final year, becoming a financial analyst, obviously there are many other factors to consider, but it comes down to a company trading short term profits for long term feasibility.
 
The last CEO of Eskom during the Koeberg debacle was quite adamant that Eskom was not to blame for the shortage of power . He said they had approached government to build power stations and were told they cannot.
Erwin has confirmed this.
Telecoms is a prime example. Ivy criticizing the public sector for not getting involved yet legislation prevents them from doing so.
Erwin, in unison with Jay Naidoo have also admitted that the telecoms policy was a mistake.
CO2 shortage, something that is not viewed as a strategic resource cost this country plenty in lost sales and revenue.
Thabo has made it clear that he considers this to be growing pains of a surging economy and that is a positive way to look at it and one that I hope many people agree with, but these growing pains are costing us dearly.
I think the government meddles to much instead of allowing natural market forces to play a more dominant part.
 
lsuacner said:
Make is the financial statements then, I am in my final year, becoming a financial analyst, obviously there are many other factors to consider, but it comes down to a company trading short term profits for long term feasibility.
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We'll agree to disagree. Both of us acknowledge that there are many factors to consider and that the decisions are difficult. I am arguing that the decisions were made based on available evidence factoring in risk and were probably well weighted, while you are arguing that decisions were short-term in nature, and probably weren't researched properly.

These are logical arguments, both with equal validity, and I cannot see them being settled with fact easily, so lets leave it here.
 
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