Electricity privatization is already happening

Henry

By Nicholas Woode-Smith

Privatization is not only the only real solution to South Africa’s electricity crisis, it is so obviously necessary and unstoppable that it is happening whether the government likes it or not.

André de Ruyter, former CEO of Eskom, estimated before his resignation that the private sector had already put 66,000 MW of renewable energy projects into development. This is 25% more than Eskom’s total electricity capacity.

In addition, more and more South African consumers are getting off the grid, with more than 4,400 MW of solar installed by private citizens. It is expected to rise exponentially in the near future.

RMB argues that at the current rate of private investment and development in electricity generation, the private sector will produce more electricity than Eskom by 2025. Other experts have confirmed these findings.

This positive news comes as Eskom is taking huge portions of its generation capacity offline to catch up on maintenance, but is still unable to keep up with decaying plants and infrastructure. Apathy, corruption and sheer incompetence have plagued the parastatal, and the entire government, for decades. But as long as we stay on this course, Eskom will become increasingly irrelevant.

Our solution has been privatization all along – as so many pundits and classical liberals have been saying for decades. And while the government continues to insist on retaining state ownership of Eskom, its monopoly is becoming less significant.

But we are not completely safe yet. This government is overwhelmingly corrupt and ideologically bent on ensuring not only state domination of the economy, but also the destruction of the free market.

While the private sector and citizens are busy easing the burden on the grid, it is not beyond the understanding that the government will again limit the generation of the private sector in the grid. If this happens, not only will an ungodly amount of private investment go to waste, it will also mean that we once again have to fully rely on Eskom and its inadequacy.

Transmission system

Even without the government backing down, there is still the problem of transmission. While the private sector can develop new generation capacity, companies are still bound to a transmission network in Eskom and municipal ownership. Much of the problem with South Africa’s electricity economy stems precisely from this stage of the process.

Many municipalities were deeply corrupt, apathetic about paying their debts, and simply refused to pay for electricity they used – often because they supplied electricity on an enormous scale to non-payers.

One of the virtues of the free market is that the incentive to produce good is based on payment. There is no political threat. So, while the government may fear charging non-payers because the ruling party wants their votes, a private company won’t mind. A company only wants its money, because that money is needed to keep the business going.

Wherever it may be, transmission should be privatized. The network must be placed under private sector control so that debts can be effectively collected and payment for services rendered and products sold can be insisted upon.

As promised, the private sector is coming to the rescue. South Africa has a robust, entrepreneurial and resourceful gallery of private companies and investors. They just had to get the green light to provide the solution to our problems.

All that is needed now is for the government to get out of the way completely. Eskom must give up on its futile attempts to maintain its monopoly. Its assets should be auctioned off and its network privatized.

Our business people and industry have proven that they are much better at doing Eskom’s work than Eskom itself. So let’s let them replace Eskom completely. If this happens, load shedding will not end until 2025. It could end this year.

  • Nicholas Woode-Smith is an author, historian, political analyst and contributing writer for the Free Market Foundation.