Special pleading disguises instinct to keep control and protect vested interests
Protectionism is the last refuge of the scoundrel. When simple customer demand isn’t enough, businesses appeal to base nationalism and invoke the need to protect jobs or, in a uniquely South African variation, the jobs of black people.
Protectionism is a worldwide problem. Donald Trump is lining the pockets of steel barons with other Americans’ money under the guise of protecting nationalist US interests from China.
Britain is committing an act of epic self-harm to “take back control” via Brexit. In SA the same instinct has been at work in the pay-TV industry, electricity industry and even banking.
When business people start espousing the importance of protecting jobs, see it for what it is: their ambition to keep profits high. Last week DStv argued before the Independent Communications Authority of SA that it should be protected from online streaming video services such as Netflix and Amazon, saying it should protect its 8,000 employees, most of them black.
DStv has been gouging consumers for decades. When last measured it commanded more than 98% of all paid TV subscriptions in SA. It connived with the Guptas to influence the communications minister into backing digital technology that would allow it to protect its monopoly.
It has been fined millions by the Competition Commission for price fixing. To now argue that its interest is to protect jobs is laughable. How many jobs have suffered from the fact that consumers have had their disposable income sucked up by overpriced TV services for decades, diverting spending power from several other industries that could have employed even more people?
And then there is the electricity industry. Like DStv, Eskom and its distributing municipalities are being squeezed by technology.
The plummeting cost of solar panels and storage batteries means it is easier than before to go off-grid. Globally, companies such as Tesla are boasting of reducing consumer electricity costs 92% using solar panels and Powerwalls.
Given the dramatic increases in electricity costs in SA over the past years, similar stories can be easily imagined here. But the vested interests in the electricity market are having none of this. There is the financially calamitous, CO²-belching, corruptioninfested Eskom.
Then there are the municipalities that add a margin to Eskom costs and distribute electricity to consumers. That margin often accounts for a large piece of municipality budgets.
These interests fight for their turf by frustrating any alternative way of getting electricity.
Late in April the National Electricity Regulator of SA (Nersa) published draft new rules that will require anyone generating less than 1MW of electricity to register with it.
Even a single panel on a rural house that powers a TV and cellphone charger would theoretically have to register.
Registration is far less draconian than licensing, which could effectively be used to bar smallscale generation completely.
Those producing less than 1MW have been exempted from licensing for a year, supporting the flourishing of roof-top solar plants on shopping centres and other commercial buildings. But clearly, that flourishing is seen as a threat. Nersa’s proposed regulations require anyone generating electricity, no matter how small, and whether it is being consumed by the generator or distributed to other consumers, to register. A registration fee is also contemplated, to be set by separate regulations.
What is the purpose of this requirement? The only conceivable one is an instinct to control, to protect vested interests. Large-scale production introduces technical issues around distribution and access to the national grid that make licensing sensible. But at the small scale, the only issue that seems to be guiding regulation is the fear that consumers will abandon Eskom and municipal distributors, so bureaucracy and cost is being erected as a barrier. Again, consumer spending power that could be directed at competitive providers of goods and services is being sapped to protect inefficient uncompetitive providers.
Protectionist special pleading was also on display over the curatorship of VBS Mutual Bank. Days before the Reserve Bank put VBS into curatorship after it serially defaulted on obligations, then chairman of the bank Tshifhiwa Matodzi wrote to the registrar of banks protesting at the curatorship. His demand for special treatment centred on the bank’s status as being blackowned, declaring its problems stemmed from “a well-organised and powerful system which does not tolerate growing black banks and black excellence”. It has turned out that the bank’s books had been cooked to hide hundreds of millions of rand in loans to related parties.
When a business needs politicians and regulators to protect it from the consequences of competition and poor decisionmaking, it is a business that often should not exist.
Protecting it provides a harbour for inefficiency and amounts to a tax on consumers, decreasing their overall spending power and diverting that spending from other companies that can compete on merit.
Whole countries are rendered less competitive, and their consumers poorer, as a result.