Tuesday, January 22, 2008

Socialist electricity failing in South Africa

For ages I've been infuriated at the almost complete absence of serious journalism about South Africa - a country with a shockingly high murder rate, growing HIV and AIDS problem, and slipping more and more towards corruption and autocracy. The reason for this absence of serious journalism is a result of a fear of criticising the black majority ANC government and being branded as "racist". The truth is that the ANC, as a socialist party, which once aspired to lead a one-party state ala Zimbabwe, believes it has a right to rule - and those within it who have ruled are, in many cases, seeking to enrich themselves with little real accountability. This being because the huge black majority continues to be grateful for the abolition of apartheid, until they are murdered, raped or die of HIV. Meanwhile, when South Africa pursues a mixed set of economic policies (reducing import tariffs but keeping electricity in state hands) it has mixed results. At the moment South Africa is benefiting from high commodity prices.

You see electricity in South Africa is all state run and provided, the government aborted its privatisation exercise for political reasons, but also banned Eskom (the state monopoly) from building more power stations. Meanwhile, it has subsidised extending reticulation to more and more poorer districts (clearly without charging sufficiently for using electricity). South Africa generates most of its electricity from coal, for obvious reasons and has now stopped exporting electricity to Zimbabwe (at last, given reports it was subsidised), Botswana and Namibia because of shortages.

The Daily Telegraph reports "Hospital operations have been interrupted, restaurants cannot cook for customers, traffic lights are regularly off and angry commuters set fire to six trains left immobile in Pretoria. Managers blame the problems on years of under-investment that have resulted in capacity failing to keep pace with a growing economy. Poor maintenance was also a factor"

Yet still there is no interest in privatisation or private sector investment.

1 comment:

Crampton said...

Why would anybody be interested in buying the utilities, except at a massive discount? What's the probability that the South African government would re-nationalize or otherwise expropriate (via new caps in prices coupled with mandated supply, or some such regulatory intervention) any substantial private investment in capital equipment? 60%? 80%? If the South African government cannot bind itself against expropriating private investment, there's not really much point in trying for privatization: any successful bidder, given the investment environment, would do better by stripping all of the usable assets from the system and running. Best to leave it nationalized under those circumstances, even where there are huge problems in the public system.