Author- Rob Handfield-Jones
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Optimal Energy (the developers of the Joule electric car) is one of those problematic entities that requires far more words to dissect than the average reader is prepared to wade through. This probably explains the lack of robust critique of the Joule, and the corresponding dearth of hard answers from Optimal Energy.
I initially contemplated writing this piece about three weeks ago when I noticed that Optimal Energy CEO, Kobus Meiring, was having a public hand-wringing session about where on earth the R6.6 billion needed to produce the Joule was going to come from. A year ago, the figure was R5.5 billion, so the amount has crept up by an extra billion or so, at an annual rate of increase of 17% versus the 4% of inflation. Let’s not fall into Meiring’s trap of blithely bandying huge numbers around - Optimal Energy is playing in the financial stratosphere. R6 billion, for clarification, represents the approximate market capitalisation of gas and welding equipment giant Afrox!
perspective
Perhaps this brings into perspective my warning of a year ago that the Joule would become a taxpayer-funded bottomless pit if the state-owned Industrial Development Corporation, which has now provided almost R200 million of Optimal Energy’s seed capital, didn’t step in and insist that the company unveil a viable business plan or, failing that, pull the plug before too much cash vanishes with no hope of a return. Meiring has now said that he believes “...it would be good...” if at least 17% of the R6.5 Bn came from government. Pardon? A year ago, Meiring told Carte Blanche that Optimal Energy had private sector backers, but declined to name them. However, he’s now looking for private sector backers and wants government to fill in the blanks. So which is it? Did Optimal Energy have private sector backers a year ago or not?
With R200 000 000 of taxpayers’ money in its back pocket, Optimal Energy is, to all intents and purposes, a state-owned enterprise, and this kind of evasiveness is just not good enough. It’s time for Meiring to play open cards about just how the company is structured and financed, and what the future holds.
In addition, if Meiring thinks government is actually able to fund Optimal Energy to the tune of 17% of the R6.6 billion, he is in for one helluva shock. The government doesn’t have a spare billion Rand for mission-critical stuff like Eskom, much less for a speculative pipe-dream like the Joule. Indeed, it would be suicidal for government to throw ten figures at private enterprise after just having brushed off the public servants’ pay demands with cries of “no money!”. I’m sure one Z. Vavi would have a thing or two to say about that. I’m thus curious to know from Meiring why he thinks “it would be good” for government to fund his company. My own company has saved far more environmental emissions than the Joule so far, without any expectation of a government bankroll. It’s called entrepreneurship! If your business model doesn’t work, Mr Meiring, then cut your losses. The R200 million of government money that Optimal Energy has already got is disturbing enough. But given the massive risks facing the Joule, the thought of it bagging another billion-odd is terrifying.
visionary
But I digress, because, despite the aforegoing, Men’s Health magazine has somehow contrived to proclaim Kobus Meiring the Men’s Health 2010 Visionary of the Year, clearly demonstrating that the magazine doesn’t grasp the key attribute of ‘vision’, which is that it requires hindsight to recognise, not to mention that vision generally results in acclaim from one’s peers and/or substantial profit. The electric car has been around for a couple of decades already, so how does borrowing R200m from government to build one make Meiring a ‘visionary’? (Gordon Murray and his T.25, anyone?) The Mens Health ‘accolade’ is an astonishing absurdity, and the Optimal Energy press release crowing over the award even more so.
Meiring’s acceptance speech quote in the press release begins: “Without the support of our Government...”. Exactly - without government funding, the Joule would still be a doodle on a serviette, and Meiring would be doing something other than trying to persuade the motoring press that the R300 000–plus Joule will sell more units a month in South Africa than Toyota’s Yaris. I kid you not, that’s what Optimal Energy predicts – 10 000 sales a year, or 833 a month, in South Africa. (Last month the Yaris sold 581 units.)
ballooning
Meanwhile, the Joule’s production budget is ballooning, and the manufacturing schedule has slipped from 2010 to 2013, which is alarming for a car first unveiled in 2007. In other words, never mind whether the Joule can actually be built and compete against what will soon be available from other manufacturers, the question is whether it will achieve mass production and profitability before the design becomes obsolete.
The Joule is good for one thing only: a parliamentary enquiry into the hazards of government funding motor manufacturer startups or any other businesses. This is particularly relevant at a time when the established SA motor manufacturers, which employ over 100 000 people and are run as leanly as is ever likely to be possible, are seriously concerned about surviving the next decade.
Kobus Meiring and Optimal Energy cannot expect South Africans to be satisfied with PR fluff. They need to start answering the hard questions which relate to economics, market share, production, distribution, financing, and profitability. It’s time for Meiring tell the SA taxpayers why he needs yet more of their money to fund his business venture, what chances there are of them getting it back, and over what time frame. In other words, Mr Meiring: put your business plan on the table, or get your hands out of our pockets.
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