As we approach 2024, I feel I should install something soft on my desk for the amount of head bashing that will be required at the misreporting of polling data. A reminder perhaps of how fragile the SA media is for all its successes with state capture.
The desperation for a narrative showing the ANC decisively below 50% might be leading much discourse, but investors must beware. While such an outcome is certainly possible (indeed perhaps likely, considering how things might evolve in the next two years), and maybe even one’s baseline, the polling evidence, appropriately adjusted, showing this is not overwhelming.
The desire perhaps to bash opposition parties instead is finding a foothold in what the polls are actually also showing us — that opposition parties are not decisively cutting through, collectively or individually.
Risks around 2024 are certainly preoccupying investors, though given a proliferation of shorter-term risks, especially regarding individuals and succession, they have taken a slight back seat compared with where they were a few months ago. Investors want to understand turning points in politics and paths towards better potential growth. There can at times be a desire among investors to hunt for things such as a “reformist top six” or an attempt to desperately map how things can improve. Such exercises normally stretch credibility.
Everyone loves a good turning point — but, again, the surface-level data might not be your friend. Recent labour market data felt like groundhog day of a quarter ago. Despite Stats SA clearly highlighting in its release the improvements in data coverage and survey responses, politicians and media were keen to jump onto record-breaking improvements in the number of people employed in the second quarter (Q2).
The data did not pass the smell test. Were 648,000 people really newly employed when there were devastating floods in KwaZulu-Natal and record levels of load-shedding? Unlikely.
Just as last quarter, when we get the second labour market data release (on September 27 — some time to wait, alas) — we are likely to see the same story again — that far fewer people were employed in the quarter and instead Stats SA was just picking up more people who were previously employed anyway.
Alternative story
It only takes a second for people to plot these different Quarterly Employment Survey and Quarterly Labour Force Survey data points over time to see what is actually going on.
The alternative story, like that of the political support, is far more interesting. There isn’t some mass momentum in the labour market but instead it (well, the formal sector at least) is actually far more robust to shocks — both through Covid-19 when fewer jobs were lost, but also in Q2 given the shocks. This is a more boring story, but also important, considering the effect on politics and social stability. It is also important in that it highlights the challenges of moving a far stickier labour market with reforms. A stickier formal-sector labour market will need more shock and awe to get it into higher gear than one that can add as many jobs as the data on the surface showed in Q2.
It is interesting to consider the political implications of a slower-moving formal-sector labour market on 2024. The marginal vote may well be elsewhere in the informal sector, where survey evidence showed more volatility through Covid-19 as people oscillated between more and less secure employment forms.
The reverse is sometimes true though — people struggle to see emerging turning points. The effect of the energy reforms is perhaps the key case of the moment. Reforms are often slow and frustrating — yet liberalisation is something different from the complexity of actually having to engineer new systems or turn around dependent state-owned enterprises.
Energy plan
We have seen 750MW of registered renewables (almost all photovoltaic) projects with energy regulator Nersa so far in 2022, with the existing 100MW cap. It is more than the previous years combined. Energy will appear on grid in 18-24 months after such a registration. Registration of 29 more such projects will be completed at Nersa on Monday. Yet most people are unaware of this momentum building or are willing to brush it aside.
Further momentum is coming, however, with the gazetting last Friday for public comment of a new schedule 2 to the Electricity Regulation Act. It was the first public success of the recent presidential energy crisis plan. Once enacted, the new schedule will remove the cap on the size of projects that can be registered rather than licensed. This is particularly useful for larger mining embedded generation projects, normally above 100MW.
The complexity of much of the energy turning point is maybe why people struggle to see it, but the lesson is we must carefully divine where the turning points are and where they are not in this area, as in many others.
The question then becomes if turning points occur fast enough to affect other issues. Whether the energy turning points occur fast enough to solve load-shedding before the 2024 elections is indeed an important question within the political economy — as is the state of household balance sheets (itself strongly affected by the labour market, but also grants and transfers) for the outcomes in 2024.
• Attard Montalto is head of Capital Markets Research at Intellidex, an SA research-led consulting company. This article first appeared in Business Day.
