The alcohol ban is overall a blunt instrument to ensure that ICU beds are available. There is some evidence supporting that it works, but generally it does not, says Intellidex’s Peter Attard Montalto on CNBC Africa. The central contradiction in President Cyril Ramaphosa’s recent address was that the third wave might last longer than last time, yet the restrictions announced are framed as a 14-day issue. 

Watch the interview here.


Is the government able to manage a process that demands more and more changes as it unfolds?

This column was first published in Business Day.

As SA takes a tentative step out of the reform darkness into the light there has been rather too much seal clapping in response to the spate of announcements recently. Some perspective is instead required.

First, nothing has actually been “done” yet on each of these reforms.

What we have — and is certainly very important — is three strong political signals on electricity liberalisation, the Transnet National Ports Authority (TNPA) and SAA. In each case it has taken years of “wrong” actions and then hard work to build up a massive pile of evidence to shift the political dial finally. Similarly, deciding after 16 years to corporatise the TNPA is a completely different kettle of fish from the far more politically knotty issue of a total rethink of the skilled immigration system, which is bound up with elements of ANC nationalism and xenophobia.

Still, the early political signals show that — eventually — evidence-based policymaking can win through. Now we need to categorise the reforms by their effects.

Some, like SAA privatisation, are the least consequential. They remove negatives from the outlook — whether that is anticompetitive behaviour or never-ending fiscal bailout risk. This can support sentiment but doesn’t really shift the economy in such a way as to boost potential growth to any great degree.

Others, like the TNPA, have limited direct upside but are enabling factors for follow-on reforms such as private sector concessioning of ports, which will actually shift the doing-business environment port users face. Corporatisation can, if done right (still a big if), start to shift the “blob” mindset inside Transnet that thinks it can regulate its own operations and cares more for its monopoly rents than port users. This type of reform will have eventual knock-on implications to higher potential growth.

The “100MW” issue of wider energy liberalisation is, however, a totally different (electric) kettle of fish. This (when it happens) is literally a bit of paper in the gazette that allows the private sector to suddenly shift its behaviour (within the wider regulatory regime of grid codes etc), and can kick-start massive investment immediately. As such there is upside to current growth and future potential growth.

We need all these sorts of reforms and there are clearly dependencies between them. But only the latter really shifts the dial and is the step that actually creates jobs and industrialisation.

Reform begets more reform. As I outlined in these pages two weeks ago, there are huge knock-on effects and additional reforms that stem from energy sector liberalisation where quick decisions are needed to unlock global funding for SA to support the transition.

Similarly, the detail is crucial — the exact form of the schedule 2 amendment that will enact the electricity liberalisation is not yet known and is contested behind the scenes, while the SAA saga rolls on with who has what money and got what permission when.

The TNPA news highlights that the detail of reform is hard but the government makes its life harder by trying to sidestep rather than dive into issues related to debt and loans. This is what has occurred on the TNPA and is a risk being stored up (and growing) with Eskom. In the TNPA’s case this has meant creating an “independent subsidiary”. The initial idea (for a few years) is to create the same sort of structure with Eskom’s independent transmission system market operator (Itsmo).

Game of pretend

The idea of an independent subsidiary that is wholly owned by a Transnet holding company, with a board that does have a fiduciary mandate to its own mission but also to its shareholder, is a game of pretend. It can work for a time certainly with an active minister in Pravin Gordhan watching over it and an active department, with well-written Chinese wall policies as well as appropriate corporate and shareholder mandates.

But in the long term the risk of such structures is that they fail due to the “Mandela problem” — creating institutional and legal structures for the best of times, not for the worst of times. With the TNPA in a regulatory role this means an entity that can be dragged back towards the views of the holdco rather than the focus of what is best for port users and competitiveness. For Eskom’s Itsmo the issue could be far more serious in terms of the energy grid, its planning, prices and the wider economy.

This is why a full stand-alone Itsmo is needed as fast as possible that reports directly into the department of public enterprises, rather than what will come at the end of this year, which will be a “success” only in being a stepping stone not the required endpoint. This is what global funders waiting to support SA’s transition will be looking for as well as those looking to invest in a liberalised energy market.

The lesson is that reform is not a series of tick box plans but a continual stream of paths with a continual succession of steps required. Some areas of the government get this but most don’t. Moving large, chaotic systems is better when everyone is moving in the same direction and gets the aim (not distracted by political contestation and jockeying, which is about to get worse as we move towards the 2022 ANC elective conference).

The Presidential Climate Change Committee seems to be getting this and is starting to shift the envelope of public debate slowly and onwards to actual shifts in nationally determined contributions (NDCs). Add in the climate act (long awaited, coming slowly) and the idea of guiding carbon envelopes for the whole economy over 30 years can be embedded.

The SA political economy is not used to this level of complexity, interconnectedness of policymaking or required speed. Will it crumble to a bumble-along as usual or rise to the occasion, realising there is no other option? This is the debate that will intensify in the year ahead.

• Attard Montalto is head of capital markets research at Intellidex, an SA research-led consulting company.


That is, if the deal — which was hammered out behind closed doors — can fly at all.

This column was first published in Business Day.

Politics, the cliché goes, is “the art of the possible…”. But the Otto von Bizmarck quote goes on, “… the attainable — the art of the next best”. In the SA Airways deal, it is very much the next best that we have. If, that is, the deal is possible at all.

All sides of the political spectrum will feel it is less than they wanted. The ANC, in the form of most of the national executive committee, wanted the state to retain control. As I have written here before, that was simply impossible.

There is no way a commercial partner would put its capital at risk while the state, with its long history of erratic non-commercial decisions, retained control. The 51% interest that has now been put on the table for the Takatso consortium to buy is certainly next best from an ANC perspective.

But the state will retain 49%, and a golden share that ensures it can never fall below 33% in the event of dilution. So maybe that will be grudgingly accepted as the only possible outcome.

But even those who have long argued (including me) that SAA should be privatised, given it serves no public interest that can’t better be met through other means, will see this deal as next best. It was hammered out behind closed doors.

There has been no public scrutiny of other offers put on the table or the conditions that were attached to the invitations to bid. I was surprised at the announcement by public enterprises minister Pravin Gordhan that 51% of the airline was to be sold, given that he had never suggested that a controlling stake may be available.

The sale of state assets can easily be abused, as most postcommunist states can attest to. Processes that govern them must meet the highest standards of public scrutiny. Has the National Treasury been informed of the details, given the Public Finance Management Act requires any public body to submit details to it before concluding a sale?

But I am also sympathetic. This was a very difficult asset to sell amid a toxic political atmosphere and the disastrous impact of Covid-19 on the travel industry. There are huge unknowns about what assets the airline has — are its previous international and regional routes still its to fly? Or has business rescue meant those and other agreements have been severed? No-one seems to know the answers.

It may be that this untransparent process was the only way a buyer could be cajoled into a commitment. Despite the department of public enterprise’s claims to the contrary, I do not believe it was flooded with realistic offers — rather it has been somewhat desperately hunting for someone to catch a hospital pass.

The consortium has Gidon Novick as the main executive in resuscitating the airline. Novick was founder of, arguably the most successful airline SA has had. He knows what he is doing. He was busying himself with co-founding a new airline called Lift, which he started in 2020 along with former Uber executive Jonathan Ayache.

He had assembled a team of top aviation execs for that. That team could now be repurposed to relaunch SAA. The question he must have pondered is whether there is enough value in the SAA he will be getting, with the government as a very present partner, compared to the clean new airline he was starting.

The consortium also has infrastructure private equity firm Harith as the financial brains. Harith’s role is unusual, given it is not using the private equity funds it manages to finance the airline. Instead it seems Harith will have a stake in the consortium in its own right.

The minister referred the consortium having “a substantial balance sheet”, but this is unclear. The consortium still must raise the finance it will need to restart the airline. Harith’s announcement referred to listing the airline.

The department referred to R3bn as the amount the consortium will put into the restart, but this number is a thumb suck — the finance to get the airline going will only be known once a comprehensive business plan is drawn up. Harith also referred to itself as “the owner of Lanseria airport”.

This is also misleading — in fact, Harith manages a fund invested in Lanseria, and many other infrastructure assets, on behalf of a series of investors. Harith is known as an able and talented investor in infrastructure, but it is the investors who are the owners, not Harith. This conflating of Harith and the funds it manages seems to have been done on both sides of the deal.

There are still big unknowns. For instance, what is the consortium actually paying for SAA? No-one knows. None of the announcements refers to a price. I guess it will be R1, with the deal structured so that the state guarantees all liabilities and hands over a completely clean balance sheet.

The R3bn number put about was anchored in some minds as a kind of price being paid, but it is far from it. In theory a business rescue plan was agreed by all creditors in 2020 allowing it to emerge from business rescue.

This required an additional R3.5bn to be contributed by the state to getting the airline up and running. Is this number actually being contributed by the government? Again, no-one knows. When the answers become clear, this may not be a deal that can be done.

So perhaps we should not see this as the attainment of second best. It may not be possible, after all.


Due to growing pressure from business to increase the threshold to at least 50MW, President Cyril Ramaphosa ended up increasing the threshold of unlicensed power generation to 100MW. This move will attract 15,000MW of new generation capacity. That is roughly equivalent to one-third of Eskom’s generating capacity, says Peter Attard Montalto, head of capital markets research at Intellidex. More on News24.

The increased threshold of unlicensed power generation to 100MW, which is ten times more than what mineral resources and energy minister Gwede Mantashe had proposed, is a positive step. However, there will still be a long period of intense blackouts. Watch the clip on eNCA.

It is the first time there has been a policy reform that has uncontrolled scalability.

This column was first published in Business Day. 

Some oomph has arrived. Why was last week’s 100MW announcement by President Cyril Ramaphosa so important? It isn’t even the policy issue in the narrowest sense, but that this was the first time there has been a policy reform that has uncontrolled scalability.

It is a liberalisation that may allow as much as 15GW of new power-generation capacity to be built rapidly in the next decade or less. This is about half of total current demand for electricity.

The inputs will be new bank lending and new jobs — new SMMEs, big companies and demand pipelines stretching into the distant future that create sustainable localisation of onshore photovoltaic and wind manufacturing, in a way that dictates from the department of trade, industry & competition never would.

It cannot be said what will happen, when and where — it will not be centrally planned, but it will be the kind of emergent system that has been rare in the past decade and a half in SA.

The upside is hard to calculate — there could be R100bn of investment in the coming decade, yet the short-term impact on sentiment must also be factored in as well as the effect on foreign direct investment and domestic investments ticking up — particularly as investors will be able to source clean power for projects and not be bound by SA’s carbon intensity.

How SA copes with this new uncontrolled expansion of projects in the years ahead will be interesting to watch. Already the calls for empowerment requirements for corporate self-generation has started, though this is like saying that a bank must ensure every single branch is empowered, not the whole company — a power-generation facility in a company is just like another division. Similarly buying wheeled power across the grid has the same BEE requirements and positive scorecard incentives as any other input to a company through its supply chain would have.

Online system

There has oddly been much doom-mongering and cries of chaos. Sure, if people were to randomly connect to the grid however they like and if no action were to be taken to protect Eskom’s finances from the impact, there would be chaos. But this is patently absurd.

Registration (rather than licensing) of projects will be required with energy regulator Nersa — as is occurring relatively smoothly now — though Nersa needs to move to an online case management system for registrations that should be bureaucratic and not have regulatory decision-making input into them if the required conditions are met.

Eskom has also been working with metros and municipalities on how wheeling can occur. Charging for this grid service can be undertaken on a vastly larger scale than before. This is important if you are going to be a foreign direct investor in data farms in Cape Town and need to get wind power from the Northern Cape. The about 24 months from now that it will take the first projects to come on-grid is enough time for Eskom to put the right framework in place.

If we are talking about half of current demand potentially defecting, a much wider shift in energy policy is needed. This was the hidden extra announcement last week from the president — that a new Integrated Resource Plan (IRP) is needed. The IRP has become such a contested and bogged-down football in recent years, stuck endlessly in Nedlac and the cabinet, but now needs to be transformed.

Short exercise

Business has already laid out in Nedlac, after the last IRP in 2019, how this can occur using an independent secretariat and a more regularised and transparent updating process in a rolling two-year cycle.

Nedlac should also be a short sharp consultation exercise, not an interference mechanism — the technocratic exercise should naturally run its course with jobs a key focus within it already.

On these pages last week, the presidential climate change committee already raised the likelihood of much faster Eskom decommissioning being required to meet a more appropriate carbon net zero glide path. The liberalisation of the energy system is likely to result in unreliable and costly-to-maintain old power stations being rapidly retired.

Eskom can focus instead on using its expertise to manage a complex transitioning grid with storage battery technology at utility scale and backup gas, as well as transmission strengthening investment programmes, not to mention paying overdue attention to its distributions business.

Lower revenues will require tariff reform to protect free electricity for the poorest and extract appropriate cost-reflective charges for backup and transmission.

Lower revenues will require an acceleration of Eskom debt deleveraging as its asset base starts to shrink rapidly (throwing its asset to debt ratios out of whack) and revenues fall. The sovereign will ultimately need to take over about R200bn of debt — also allowing space for new borrowings to fund the strengthening of the transmission grid and social costs of the just energy transition. Unbundling in this world becomes even more important.

This is certainly complex but the answers will be found already on the table. It is a time for the department of mineral resources & energy to provide new leadership on energy policy as this transition takes hold — to provide the foundations for liberalisation to occur smoothly and to ensure the risks are known and mitigated.

Load-shedding will intensify in the next two years before new private electricity-generation capacity comes on-grid with existing green projects already under way. It will be a tough period though a path through and out the other side is much clearer now.

Clear thinking will be required in this period. The folly of 20-year agreements with Karpowership rather than two-year ones to bridge this gap becomes all the more obvious.

These are exciting times for the electricity system and its stakeholders. A huge, interconnected web of issues is being forced to morph by a single decision. Change could become infectious, especially, as unions have finally figured out, this can be win-win all round. Win-win is why last week was so important.

Attard Montalto is head of capital markets research at Intellidex, an SA research-led consulting company.


Listen to Power FM Khaya Sithole in conversation with Nolwandle Mthombeni, senior banks analyst at ‎Intellidex as they talk about succession planning in banking. Mthombeni highlighted that it’s unfortunate that Absa finds itself losing talent beyond Daniel Mminele. Even the deputy CEO in Maria Ramos’ era, who was expected to be her successor, resigned to go to another bank.

Listen to the full interview here. 

Unemployment is unlikely to return to pre-crisis levels given we don’t see real per capita output returning to pre-crisis levels, says Peter Attard Montalto, head of capital markets research at Intellidex. To absorb the lost jobs, the economy would need to see trend growth well above 2.5% rather than the 1.7% we expect.

More on Bloomberg. 

Following our research into SA’s first two social impact bonds (Bonds4Jobs and IBIF), the hope is that future social impact bonds will build in rigorous impact evaluation – rather than simple outcome verification, says Zoheb Khan, social economy research manager at Intellidex, in Moneyweb. This would allow for a more nuanced understanding of the various effects of social programming and how they might differ for different groups of beneficiaries.

Read the full article here.

The decision has had a substantial and negative effect on public interest in conflict with the Competition Act.

This column was first published in Business Day.

The decision by the Competition Commission last week to block the sale of Burger King by Grand Parade Investments is incomprehensible. It has severely damaged SA’s reputation as an attractive destination for foreign investment; it has damaged the ability of black-owned firms to realise their investments; and it has harmed the advancement of BEE broadly by introducing a new and unexpected cost for firms that have high levels of black ownership.

The facts are these: Grand Parade Investments, a 69% black-owned JSE-listed firm that was founded with R28m raised from 10,000 historically disadvantaged South Africans, wants to sell Burger King (SA) to Emerging Capital Partners (ECP), a private equity firm. ECP is an Africa-focused firm with investments across the continent, headquartered in the US. The commission blocked the deal because it “would lead to a significant reduction in the shareholding of historically disadvantaged persons in the target firm, from more than 68% to 0% as a result of the merger”.

The next day, the share price of Grand Parade plunged 17% before closing 10% down.

The commission said it had blocked the transaction on the grounds of section 12A(3)(e) of the Competition Act. This requires the commission to consider the effect that the merger will have on “The promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons … in the market”.

I quote you the specific paragraph, so I can also tell you that the commission did not mention three other paragraphs of 12A(3), including the effect on “employment” (paragraph b), “the ability of small and medium businesses or firms controlled or owned by historically disadvantaged persons to effectively enter into and participate in or expand within the market” (c), and “the ability of national industries to compete in international markets” (d). On all three of these, the decision flies in the face of the requirements of the act.

Let me explain why.

First, ECP had proposed contributing R500m of new capital to the business to invest in new stores creating 1,250 jobs (so the prohibition conflicts with paragraph b). Second, the fast-foods industry is one where international private equity provides a common exit strategy for entrepreneurs. For example, in 2016 McDonalds was sold to MSA Holdings, based in the United Arab Emirates, by Cyril Ramaphosa before he became president.

Grand Parade may have been inspired by that to have invested in Burger King. But in future, any black entrepreneur will have to think twice given that their BEE status will compromise a potential exit in future, given that firms with low BEE levels will have a comparatively smoother route to an eventual sale. The decision conflicts with paragraph c in that it makes it harder for black entrepreneurs to enter the market.

Finally, the decision is a major blow to foreign direct investment as it signals to foreign buyers that they cannot buy firms that have high levels of black ownership. Because FDI is a critical factor in linking the SA economy to international markets, this harms the public interest in paragraph d.

Then, let us get to paragraph e.

On this one, too, the commission has got it wrong. The 10% fall in the share price evaporated R85m of black wealth. That capital would have been invested in “increasing the levels of black ownership in the market” had the commission acted otherwise. By maximising the amount that exiting black shareholders can receive, you are creating capital in the hands of black people to invest in the market. The prohibition therefore damages the spread of ownership of black people in the economy.

Had Burger King been sold by a non-BEE vendor, it would have realised the full value of the asset (and be worth R85m more), which it could then have reinvested. So the commission’s decision systematically biases ownership across the market against greater diversity and inclusion of black people, in conflict with the requirement of paragraph e.

The decision should rightly be challenged in the courts. The Competition Tribunal, as law firm Webber Wentzel pointed out in a note on the decision, has already said the commission must apply considerable caution when the interests of black investors who support the transaction are directly affected.

The decision has already added significant concerns for other proposed deals such as Dutch brewer Heineken’s proposed purchase of Distell and the acquisition battle for 41% black-owned IT firm Adapt IT, one of the bidders for which is Canadian. These illustrate the point — the cost of deals has gone up, particularly for black vendors, while much-needed foreign investment has been directly threatened.

The commission has defended itself saying it is merely “applying the law”. Well, no, I don’t think it is. In fact, I think on a more thorough interrogation of the economic impact of its decision it becomes clear that it has had a substantial and negative impact on the public interest in conflict with the Competition Act.

Theobald is chair of research-led consulting house Intellidex.


The banking sector is facing an intensifying threat from fintech. But banks are playing the long game, and cash is – sadly – still king. While having world class payment platforms is only great if the economy isn’t cash reliant, writes Nolwandle Mthombeni, senior banks analyst at Intellidex in fin24. Last year we saw good growth in digital adoption reported by the banks, which is key to reducing the cash reliance in the economy. But the proportion of digitally active is still very low, for all the progress that we have made.

Access the full fin24 column here.