Privatise Eskom to Reduce Risk

Open-Ed

There are many problems with South Africa, but Eskom and its continuing descent into darkness and chaos seems to be a symbol for all of it. Corruption, mismanagement, theft, incompetence, ideological stupidity, and now, attempted murder.

On the 12th of December, two days before the official announcement of his resignation, ex-CEO of Eskom, Andre de Ruyter was allegedly poisoned. This comes after a timeline of disasters as De Ruyter attempted to fix a devastated parastatal – finally giving up in December.

Many were hopeful about De Ruyter’s leadership when he took over Eskom in 2019. His tenure saw him attempting to tackle coal theft while overseeing increased maintenance. In practice, he oversaw the worst levels of loadshedding that South Africa has ever experienced.

This is not to say that that was all his fault. De Ruyter has been the target of tremendous levels of scrutiny and attacks by members of the government, with Gwede Mantashe going as far as accusing Eskom and De Ruyter of “actively agitating for the overthrow of the state” – many of whom are likely beneficiaries of the coal theft and Eskom corruption. The fact that De Ruyter was poisoned suggests that he truly does have a lot of scary enemies.

Eskom truly is in a dire state, which puts South Africa in an even direr state. As the sole electricity provider in the country, Eskom is an essential utility. Without a stable electricity supply, South Africa’s industry has been collapsing, commerce has slowed to a trickle, crime has risen, and people are left in darkness.

This is no way for a country to live. Let alone a country that is arguably Africa’s largest economy.

But politicians don’t seem to be taking the Eskom crisis seriously. Since the 80s the writing had been on the wall that our electricity industry was going to inevitably collapse. This is putting the vast amounts of corruption, sabotage, and theft aside. As a monopoly, Eskom does not truly have the incentive to do a good job. Its officials and employees are paid regardless. It can go bankrupt many times over and always count on the government to bail it out.

Eskom is unaccountable, incompetent, and lazy. A symbol of our entire government. Because the public sector does not need to succeed. It just needs tax, money printing and deficit spending.

There is only one solution for saving South Africa from the brink of grid collapse and a dark age; that is the privatisation of the electricity industry.

The fact that we rely on a single, incompetent monopoly to provide an essential resource for our flourishing is ridiculous! Eskom has already proven incapable of doing its job properly. We need other companies to step in and provide an alternative.

In fact, we almost privatised the industry under GEAR in the 90s. But the ideological fanaticism of the South African Communist Party and COSATU sabotaged the process – leaving us with a bloated Eskom that was refusing to fix power plants or construct new ones to power SA’s rapidly growing population.

At the time, Eskom seemed to be doing alright. But that was because it was measuring its success by only two metrics. Electrification of homes, and the price of electricity. Both metrics were flawed because the price of electricity was kept artificially and unsustainably low by debt, and because the electrification of homes was not followed by an increase in electricity generation.

Corruption intensified, speeding up the process of decay, but decay was inevitable. Eskom was simply making too little money without putting in any effort to maintain generation for the long-term. Collapse was inevitable.

But it isn’t too late. The government can solve the electricity crisis by simply abolishing the Electricity Act. Allow any person to become a power producer without the need for corrupt licensing or state connections. Let the only requirement for feeding electricity into the grid be a safety check.

This will not only allow many different companies to feed into the grid, solving the supply issue  – it also decentralises risk. When Eskom experiences through a crisis, we’re all affected. When a private company undergoes a crisis, only a few of its customers suffer, and they can respond by changing to a different provider. That incentivises companies to perform well. They want to retain customers and make a profit.

It also reduces the effects of corruption. If corruption is causing a company to perform badly, customers can just switch over to a less corrupt one. And private companies can’t rely on government bailouts and infinite loans. They have to be accountable to their customers.

Privatisation is the common-sense solution. We only need our legislators to see common sense.

We are long past the point where the government can cling onto its Leninist pursuit of the “Commanding Heights,” or oppose privatisation due to a Soviet-era distaste for freedom. South Africans need electricity. Eskom can’t provide it. But the private sector can.

Author: Nicholas Woode-Smith

Nicholas is an author, economic historian and political analyst, is a contributing author for the Free Market Foundation. 

The Free Market Foundation is an independent, non-profit, public benefit organisation, created in 1975 by pro-free market business and civil society national bodies to work for
a non-racial, free and prosperous South Africa.

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