Eskom bound for demise under status quo

THE UNFOLDING horror at Eskom demands that the power utility must at some point face its Brexit moment.

The question whether to privatise Eskom or keep it under state control has become a singularly important issue of national importance and calls for public involvement to be final arbiters on the matter since they carry the burden of Eskom’s mounting debt.

The fleeting New Dawn will not liberalise the power producer – the power dynamics in the ruling ANC and the tripartite alliance will water down President Cyril Ramaphosa’s bold reform plans that have got rating agencies jumping up and down in excitement.

Ramaphosa will need the electorate to empower him to get on with the business of transforming Eskom and other cash burning state-owned entities.

A national referendum is the easiest way to achieve that.

This will help Ramaphosa in two ways: he would have given credence to the idea of the government of the people by the people and will know what economic future South Africans desire.

The notion that South Africans are inherently opposed to anything that resembles privatisation has never been tested in a democratic South Africa.

The left, or whatever is left of it, would have us believe that we are obsessed with owning entities that do not deliver any value to us as shareholders.

The liberal right with its gospel-like enthusiasm wants us to simply dispose of the entities.

Between these two extremes lies the voice of South Africa.

It’s a misnomer that the debate on an entity as important to our lives as Eskom is dominated by people who appear to have no economic plan to offer South Africa. The power utility is much bigger than an ideological battle between the political elites.

Normal South Africans should be at the front and centre of the debate just as it happened in the land issue.

The problems can no longer be confined to the corridors of Megawatt Park, the Union Buildings and the screaming matches in Parliament.

The referendum should ask three key questions: whether South Africans want Eskom to remain in government hands, with the private sector, or a mix of the two a la Telkom.

The state can still have a majority shareholding, while opening doors for expertise from the private sector.

This would greatly contribute to reduction of the public liability to Eskom as well as to the reduction of subsidies and state guarantees to the utility.

It will also unleash the potential of increasing the efficiency of the utility and, by extension, the competitiveness of the economy as a whole.

That is what attracts foreign direct investment.

The government would need to establish contracts that ensure responsiveness from the joint venture to provide good service to constituents.

It would also need to include supportive legislative measures and transparent processes that are in the public’s best interest.

Just this week, the entity said it is facing a more than R150 billion shortfall after it got less tariff increases than it had initially asked for and the government didn’t give it the R100bn it has begged for.

This means the power utility goes cap in hand back to the government and by extension taxpayers to give it further financial support. Taxpayers already guarantee a lion’s share of Eskom’s R420bn debt, which gobbles up nearly 10 percent of the country’s gross domestic product.

Margaret Thatcher’s privatisation revolution in the 1980s might have been extreme, but it did revive a stagnant British economy with market-based reforms. Jobs were slashed and employment in the electricity and gas industries was cut in half between the mid-1980s before privatisation and mid-1990s after privatisation.

A study by Britain’s treasury has found that a decade after electricity privatisation, real prices were down more than 25 percent.

Other democracies the world over have taken the issue of privatisation of key state assets to the electorate.

In 2013, the New Zealand government asked for the participation of its citizens in its policy to partially privatise four energy-related state-owned enterprises and reduce the government’s share in Air New Zealand.

The referendum asked: “Do you support the government selling up to 49 percent of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand?” The answer was a resounding no with 67.3 percent of the electorate voting nay. That is the sort of freedom of choice that South Africans could do with.

The country also needs a frank discussion on whether the Eskom’s bloated workforce is sustainable.

Ironically, the utility says it does not have skills to power the ailing economy, despite its 40 000-plus headcount workforce as unions – who still believe that the 4th industrial revolution is a hoax perpetrated by imperialists – fight tooth and nail to save a few of their members’ jobs at the expense of the nation.

The partial opening of Eskom to the private sector can accomplish much good if executed well. But if done incorrectly, it carries a risk that can leave behind a legacy of trouble that can impact the economy and society and linger over a country for decades.

South Africans deserve to have their say on whether they want to keep on bailing out Eskom indefinitely, with no light at the end of the tunnel, or want to see a fundamental change in the structure and governance of the entity.

Hoping that Eskom can return to financial stability under the status quo is just wishful thinking.