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16 Wednesday, May 14 2014 BUSINESS REPORT
Opinion&Analysis
MORE than 5 000 power andwater professionals fromdifferent African utilitiesand institutions descendedon Cape Town yesterday to
engage on the challenges that face thesetwo crucial sectors on the continent.
Although Africans are quick to dispelthe notion that theirs is a dark continent,more than 600 million people are still with-out electricity in sub-Saharan Africa.
According to World Bank figures cited
by Agnes Dasewicz, the director of USAid’sPrivate Capital Group for Africa, at theAfrican Utility Week yesterday, businesseson the continent, on average, experience 56days of power outages a year, translating toa loss of 20 percent of working days yearly.
These are not new discussions, theytake place every year yet even a countrylike South Africa, considered to have amore stable grid than most, is able to avertgeneral outages only at the expense of bigbusinesses.
As Frans Vreeswijk, the secretary gen-eral and chief executive of the Interna-tional Electrotechnical Commission put it,some countries have enough resources topower the entire continent but they do nothave the money to make anything out ofthose resources, be it rivers for hydro-power plants, gas or solar energy.
The planned integrated southernAfrican electrical grid, which is being pi-loted by the region’s power pools, is a note-worthy start but something to take awayfrom Vreeswijk’s remarks yesterday is thatwe do not need to build big centralisedpower systems. Isolated small-scale off-gridpower generation is gaining momentumaround the world. And such systems can beinstalled in months rather than years.
So why is South Africa sceptical of off-grid generation?
Ayanda Nakedi, the senior generalmanager of the renewables business unitat Eskom, spoke about off-grid power thathad been rolled out to a few rural commu-nities, but it was not reliable. Its perform-ance showed that it was “electricity forpoor people” and people protested againstthat. They wanted the same quality of
power supply provided to people in theurban areas and rightfully deserved that.
If there is one thing the engagements atAfrican Utility Week should try to providea solution to, it is these small areas of con-cern because the bigger problems, biggerpower stations and bigger and smartergrids will take years to sort out.
LeisureThe hotel, gaming and entertainmentindustry leaders looked a lot like playersforming strategies on a chess board.
Announcements about who is buyingand selling what came trickling down yes-terday from Tsogo Sun, Sun Internationaland Grand Parade Investments (GPI).
By the end of the day all three playershad made healthy gains on the JSE, led by
GPI, whose shares shot up just over 5 per-cent after it sold 70 percent of its GPI Slotsbusiness to Sun International.
GPI said the opportunity to sell a major-ity stake in a business with 5 000 limitedpayout machines to Sun Internationalwould give GPI Slots a bigger national andinternational platform. GPI will benefitthrough the remaining 30 percent stakethat it will have in the business.
It will also give GPI an opportunity todiversify its capital by deploying theproceeds of the transaction into non-gaming assets.
In the other court, Tsogo Sun, whichhas been making huge investments in thehotel and casino industry, has set a goal tobe key player in these sectors. Its strategicmove to acquire 40 percent shares in twoentities owned jointly by GPI and Sun
International does not come as a surprise. The company has recently invested
R220 million in the refurbishment and re-launch of the Southern Sun Elangeni andMaharani hotels in Durban.
For Sun International, which hadearlier planned to cut 1 700 jobs due tomuted growth as a result of highly in-debted consumers cutting back on domes-tic travel and gambling, the move is basedon a pure strategy.
The group’s chief executive GraemeStephens said the move was consistent withits long-term objectives of increasing inter-est in key strategic assets, streamlining thecompany’s structure and enabling blackempowerment value creation. page 17
Edited by Banele Ginindza. Contributions fromLondiwe Buthelezi and Nompumelelo Magwaza.
WHAT do you think wouldbe the tenor of globaldebate if Chinese Presi-dent Xi Jinping, on a tourof South America, were to
give speeches at each stop about the threatposed to the region by the US?
While visiting Cuba, he would offerpromises of “deepening our alliance”.And, at the trip’s end in Mexico, Xi wouldcall that country “freedom’s frontier onthis divided peninsula”.
Anything of the sort would be greetedby the universal outrage of global com-mentators – and probably by calls for sanc-tions on the part of leading US politicians.
But switch China and the US’s places,and this is almost exactly what happenedwhen US President Barack Obama visitedAsia late last month. Those words above were his – but directed to the Philip-pines and South Korea, rather than Cubaand Mexico.
Indeed, few issues nowadays can avoidbeing drawn into the ideological sinkholeof Chinese-US competition. But globalnervousness goes further than that.
In a speech to students in Pennsylvania,Obama recounted that “countries likeGermany, China and India – they’re work-ing every day to out-educate our kids sothey can out-compete our businesses”.
Even the Hollywood press has beenabuzz about whether studios are “kow-towing to China” by editing their films in anattempt to enter the lucrative Chinesemarket.
Apart from creating an attitude of fearand mistrust among the next generation ofAmericans, this kind of narrative pro-motes a dangerous national solipsism.
A world where all other countries areeither threats or allies and a world that canbe either “with us or against us” is anincreasingly dangerous place – whetherthose words are uttered by a sitting Amer-ican president or others.
What may be intended as harmless,even cheerful motivation, can be turned,almost accidentally, on its head – andbecome the spark for a generation’s worthof misunderstanding and mistrust. Hardlythe goal of political leadership.
Asia’s political leaders have been littlebetter. They are far from acting in a harmo-nious fashion, mired as they are in theirown petty squabbles.
The new “game” in Asia reads like afootball World Cup schedule: Japan versus
South Korea, South Korea versus China,China versus Vietnam – and North Koreaversus everyone else.
Asian leaders should know better. Theirpopulations need them to focus on equi-table and sustainable growth. Instead, fartoo many politicians seem stuck in thepast, brooding over wars that ended 70years ago.
The cliché is that Asian nations havelong histories and long memories, whichgives them wisdom. But the opposite canjust as easily be true. An obsession with aperverse interpretation of historyprevents co-operation on the real chal-lenges of the future.
Small wonder then that many, bothwithin and without Asia, have clung to thenotion, eagerly seized on by the US, thatAmerica has to step in and “fix” the region.But this is a dangerous idea.
One needs to look only at the MiddleEast to see what kinds of disasters suchthinking can cause.
Nor is the seemingly placid state ofEurope today something that Asia shouldaspire to, and not just for the obviousreason that a huge amount of blood wasspilt in the interim.
What many too often forget is that thereason Europe is so seemingly peaceful isbecause western European nations haveessentially forfeited any notion of an inde-pendent foreign policy. In crisis after crisis,they have listened to the US’s luring callsand become totally subservient.
Europe, as many Europeans tacitlyrecognise, has become a tool in the globalexercise of American power.
One need only look at a map of US over-seas bases to know who is really calling theshots globally.
What is needed is not just an Americanand a European pivot to Asia, but a Russ-ian pivot to Asia, an African pivot and –most of all – an Asian pivot to Asia.
Asia will undoubtedly become theworld’s most important region. In the earlystages of this century, it will have both theworld’s largest economy, China, and itsmost populous nation, India.
The future of such a continent shouldnot be determined by any one group,certainly not the American political class.They stand out because they are simul-taneously the most ill informed about theregion – and, curiously, the most prone tobelieving they alone have a right to shapeits history.
Co-operation, rather than rivalry, onAsian politics will be in everyone’s best in-terests. Progress on that vital issue cannot
– and should not – come from outside.It is short-sighted of China’s neigh-
bours to antagonise what will inevitablybecome the region’s most powerful politi-cal, economic and military force.
But it is just as short-sighted of Chinato promote any vicious form of national-ism as a means to distract from domesticdissatisfaction or challenges.
China is here to stay. Constant obsess-ing about regional conflicts, by whichever“camp”, poses the very real danger of be-coming a self-fulfilling prophecy.
More than this, the real problems of the21st century – those to do with scarce re-sources, climate change, rising populations
and technological over-reach – need to besolved with the help of the entire world, notby squabbling groups of short-term allies.
China, in its well-understood self-interest, should be at the centre of theseefforts – possibly even leading them. Forthis, it will need the consent and co-opera-tion of its neighbours.
The latter should not fall victim to the“western” folly of treating it like a pariah,largely because it has a very different butactually quite well-functioning politicalsystem.
The Chinese, in turn, need to step up tothe plate and validate their claims of a“peaceful rise”. They must start to compro-mise. If they do not, they risk living up tofrequent accusations of bullying madeagainst them.
In the end, only a series of mutuallyagreed regional rules can prevent a race tothe bottom. To the victor the spoils? Any-body who seriously believes that notion,even for a moment, has no idea of the last-ing damage that could be created in thestruggle for control of a small group ofuninhabited islands.
Chandran Nair is the founder of the GlobalInstitute For Tomorrow in Hong Kong. Follow theGlobalist on Twitter: @theGlobalist
FEW central bankers have had asmuch success in so short a periodas India’s Raghuram Rajan. Eightmonths ago, when Rajan took overas head of the Reserve Bank of
India, the rupee was in a free fall, specula-tors were betting on a debt crisis, and econ-omists buzzed about India being the firstBric (Brazil, Russia, India and China)nation to have its credit rating cut to junk.
Today, India’s central bank is back tobattling more conventional foes such asinflation, not financial Armageddon,thanks to Rajan’s decisive moves to stopcapital from fleeing the economy.
But Rajan is about to confront an evenbigger challenge: India’s dysfunctionalpolitics. On Friday, India’s 1.2 billion peo-ple will get a new government. Electionsthat began on April 7 are widely expectedto deliver Narendra Modi’s BharatiyaJanata Party to power.
Markets are rallying amid expectationshe will cut red tape, attack corruption, andreduce the crushing poverty that leaves800 million people living on less than $2(R21) a day. Since 2001, Modi has served aschief minister of the western state ofGujarat, where growth significantly out-paced the national average in 11 of the past12 years for which data are available.
Voters want Modi to replicate that per-formance across the nation. Yet as Modiwill learn early on, enacting change in aregion of 60 million people that was famedfor entrepreneurship and industriousnesswell before he came along is one thing;doing it in corrupt, inefficient and ossifiedNew Delhi is another.
As the magnitude of the task becomesclear and vested interests dig in, expectModi to do what so many governmentsbefore have done: put pressure on thecentral bank to boost growth. Rajan shouldbrace for unprecedented criticism that theReserve Bank is not doing enough tosupport the nation.
He should stand firm against the poli-tics of expediency and focus on establish-ing a foundation for sustainable growth.The most important contribution Rajancan make is getting India’s inflation ratewell below the growth rate.
Consumer prices rose at a rate of8.59 percent last month, the fastest paceamong the biggest emerging markets. Theeconomy is expanding at barely half thatrate: roughly 4.7 percent, near last year’s4.5 percent, which was the slowest since2003. That right there explains so many ofIndia’s vulnerabilities.
Rajan has raised borrowing costs threetimes to 8 percent. The moves were partly
aimed at stabilising the rupee after itplunged to record lows. But Rajan is alsotrying to rid the $1.8 trillion economy ofthe chronic inflation that exacerbatespoverty, damages competitiveness andinhibits foreign direct investment.
Since taking over as the central bank’sgovernor in September, Rajan has hadreasonably free rein to shore up India’sfinancial system. With crisis in the air,politicians were all too happy to defer tothe central bank. But inevitably, Rajan andhis team will find themselves in an uncom-fortable spotlight. Expectations are highfor Modi. Businesses and households alikewill be looking for fast dividends that willbe very hard to deliver.
The changes India needs will be noth-ing less than explosive for the country’sleadership. Any moves to root out corrup-tion, make the government more account-able and reduce the barriers to everythingfrom trade to investment will require epicbattles with entrenched interests.
So will any effort to reduce governmentdebt or narrow the current account deficit.It will not be long before the pre-electionhype about Modi taking his “Gujaratmodel” nationwide meets governing reali-ties, dragging down his approval ratings.The quickest way to calm the masses willbe the central bank’s compliance. ButRajan must resist the torrent of criticismsure to come his way.
Giving in would not just fan fresh infla-tion – it would also remove the urgency forthe government to internationalise aneconomy that risks getting left behind asChina races forward. Rajan has thegravitas to push back.
The University of Chicago economistdid India proud when he headed up theInternational Monetary Fund’s (IMF’s)research team from 2003 to 2007.
Prominent economists such as Colum-bia University’s Jagdish Bhagwati thinkRajan is an obvious choice to replace IMFhead Christine Lagarde someday, boostingIndia’s global clout.
For now, though, Rajan faces what maybe the toughest job in global economics.Instead of becoming Modi’s monetarylackey, Rajan should speak truth to powerthe way central bankers in the US and EUdid once upon a time. Rajan is just the manto play the honest broker role New Delhihas lacked during the past decade.
If he can turn the tables and prod Modito alter the mechanics of India’s economy,Rajan will be remembered as one of his-tory’s greatest reformers, and the worldeconomy will be a better place.
William Pesek is a Bloomberg columnist.
India’s central bank headto face fresh challenge aspolitical pressure looms
A TAXI driver has become anovernight celebrity in China afterhe found a huge bundle of cash inthe back of his taxi and promptlyreturned it to its rightful owner.
Zhao Lei found 170 000 yuan(R285 000) in a paper bag on theback seat of his taxi after takinga young couple to a car dealershipin Harbin, in the north-easternprovince of Heilongjiang.
Instead of keeping the hugehaul – probably three times hisannual salary – he handed it tothe company he works for.
The firm contacted the passen-gers and returned the money.
The delighted couple, who saidthey had been carrying the cashso they could pay for a new car,tried to offer Zhao 10 000 yuan asa reward for his honesty, but herefused to accept the cash.
“It is what I have to do,” thedriver said after news of his deedcame to light.
“Anyone who lost such a bigamount of money will go crazy. Iwon’t take advantage of that.”
Taxi drivers in China earn less
than 5 000 yuan a month for work-ing punishing 14-hour shifts, sixdays a week.
The story of Zhao’s selfless-ness is likely to be held up as anexample of community spirit bythe Chinese media, in contrast toa wave of stories demonstratingthe increasing individualism ofsociety.
In 2011, a little girl who wasrun over by two cars was seen oncamera bleeding to death whilenearly 20 passers-by simplyignored her plight. – Daily Mail
❚❚ DILBERT ❚❚ DIARY
Big players blind to real value of small-scale off-grid power
Asia co-operationwill do the world awhole lot of good
BUSINESS WATCH
What is needed is not just an American and aEuropean pivot to Asia,buta Russian pivot to Asia,anAfrican pivot and – most ofall – an Asian pivot to Asia.
IN MYOPINION
Selfless taxi driver keeps Chinese idealism on the road
HONESTBROKER
William Pesek
You can write, fax or e-mail a letter to:The Editor, Business Report, PO Box1014, Johannesburg 2000Fax: (011) 838-2693e-mail: [email protected] daytime telephone numbers and full address.Pseudonyms are not acceptable.The editor reserves the right to edit or reject lettersDIRECT ENQUIRES TO:JHB NEWSDESK 011 633 2484You can send feedback, complaints orsuggestions to:e-mail: [email protected]
❚❚ CONTACT
Chandran Nair
❚❚QUOTE OF THE DAYYour words have power! They can be tools that build or weapons thatdestroy… your choice. – Tony Gaskin, American life coach, motivational speaker and author
Japanese Prime Minister Shinzo Abe, right, and US President Barack Obama. Co-operationbetween countries, not demonisation, is the way forward, the writer argues. PHOTO: AP
