Dear Mr Gordhan, Eskom is a ‘public bad’, not a ‘public good’

IN A PIECE published in the Daily Maverick, Public Enterprises Minister, Pravin Gordhan appears to respond to an earlier piece written by myself and published here and in the Cape Argus. The example of Telkom deregulation which I have raised, on more than one occasion, is most certainly taken verbatim, and it is no coincidence Gordhan’s response occurred on the day my piece was published by IOL.

Electricity may be a public good, but when the only source of electricity for the majority of South African households is a government department or City billing system, the results will always favour the producers not the consumers.

Peter Fabricious reports that Gordhan responded to a question put to the Financial Times Africa Summit on Tuesday on “why South Africa needed Eskom at all?”

He says: “A member of the audience put it to him that South Africa had been ahead of the curve in 1993 and 1994 in licensing mobile telephone companies and that had changed the country’s telecoms landscape.”

“Given that history of trailblazing, why do you need Eskom?” was the question for Gordhan, who was participating in the London summit remotely.”

To which Gordhan responds by doubling down on his party’s statist rhetoric, that “Eskom is necessary because providing electricity is a public good and the state should be involved in the provision of public goods.”

Gordhan then goes on to suggest without any evidence, that “placing the provision of electricity into private hands in other parts of the world had not worked out well, including because it had increased prices” and this by falsely listing Britain as an example. Either he is a willing idiot, or totally oblivious to the accepted wisdom and economic consensus surrounding the rise in UK fuel prices.

It is no secret that Europe’s plan to deploy natural gas as a ‘transition fuel’ has encountered a major setback and has run aground due to the collapse of the NordStream Pipeline resulting from the war in Ukraine. There is thus a major gas shortage, where 80% of the increase in UK electricity prices has been due to soaring gas prices, resulting from the supply-side market contraction. The Economist provides reasons for soaring energy bills based on projections on the basis of wholesale prices for natural gas, and the problem has nothing to do with privatisation.

Even in Costa Rica where private companies are being criticised for failing infrastructure following a natural disaster in a situation where the state has failed to regulate on service quality, there is broad consensus that the previous regime under a single state-run operator, was far worse.

Instead of deflecting our attention away from deregulation, by providing us with a reasonable timeline for private sector participation in energy-to-the-home (ETTH) and actioning upon plans already in place to split Eskom up into competing entities, Gordhan insists on trotting out effete intellectual arguments that lack any substance, save to satisfy his party’s bizarre insistence that maintaining the solitary energy SOE as a mechanism for sheltered employment to reward its union partners, is somehow a ‘public good’.

The results are plain to see.

Far from engaging the private sector in the provisioning of energy directly to consumers, our government is maintaining a false energy monopoly, in effect a pyramid scheme responsible for rolling blackouts.

A flawed scheme based upon a shibboleth, a custom or tradition, which essentially bars the independent sale of energy directly to South African households and which is anything but an ‘energy commons’, derived from a ‘national pool of energy’.

My earlier piece outlines why the inclusion of inputs from Independent Power Producers (IPPs) will have no direct impact upon consumers, given the massive Eskom debt (currently 400 billion rand), and especially if the resulting model continues to be driven by government diktat — socialist-motivated centralisation and bureaucracy-driven, command-style economics, instead of the free market.

Even if our government were to roll-over the entire Eskom debt, the modus of the SOE is so far gone down the road of welfarism and bail-outs, that we are flogging a dead horse and expecting it to run. “Between 2007 and 2021”, writes Drikus Greyling “Eskom invested R680 billion to increase its generation capacity. However, after this huge investment, Eskom produced less power than when it started.

Gordhan’s response to the Financial Times Africa Summit must be rejected as nothing more than empty rhetoric, elegant-sounding political words, entirely lacking evidence-based research and clearly statements not based upon any empirical inquiry. His pronouncements need to be called out for the dangerous obfuscation and mendacity they truly represent.

published in part by Cape Argus 28 October 2022

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