The Eskom Megawatt Park headquarters in Johannesburg. Picture: Waldo Swiegers/Bloomberg
The Eskom Megawatt Park headquarters in Johannesburg. Picture: Waldo Swiegers/Bloomberg

What insights might be gained if one approaches the issues around Eskom from an applied ethics perspective? Eskom is a monopoly entity providing an essential service. Both aspects of this reality have important ethical consequences.

Under normal circumstances in a free-market economy, strict rules apply to ensure fair competition among businesses in the same sector. The active Competition Commission — giving fines to those who enter into price collusion — is an example of how jealously competition is guarded.

The enforcement of competition rests on two assumptions: the market must be open to fair play; and prices are normally lower in a more competitive environment. The result is an ethical playing field with benefits for customers. As soon as a state entity operates as a monopoly both the notions of “fair playing field” and “fair pricing” come under pressure.

Because electricity (unlike the service of an airline like SAA) is an essential good, and because there are no alternatives, the management of the SOE must adhere to the highest levels of business ethics

In principle, Eskom is therefore breaching the “normal” application of the fairness principle. The procurement of sustainable energy from outside the utility, and the regulation of electricity prices by the National Energy Regulator of SA (Nersa) are both (mostly failed) attempts to restore some modicum of fairness to the electricity market.

But if one argues that electricity is a public good that should in principle be provided by the state via a monopoly state-owned enterprise (SOE), there are serious ethical matters to consider.

Because electricity (unlike the service of an airline like SAA) is an essential good, and because there are no alternatives, the management of the SOE must adhere to the highest levels of business ethics, international best practice and efficiency.

The mismanagement and corruption of Eskom are therefore a serious moral breach of the contract between state and citizens, apart from the negative consequences on business and private lives in general.

Because SA is a signatory to the Paris Agreement and made international commitments to reduce carbon emissions, Eskom has the ethical responsibility to make tangible progress in shifting from coal-based to renewable resources.

The question of privatising parts of Eskom is — from an ethical perspective — not an ideological matter that should be rejected or accepted in principle. If an essential public service can be provided without interruptions and at a reasonable price due to a partnership between the state and the private sector, it must be an option.

In SA, the state has unfortunately proven its incapabilities, which have huge unethical consequences. It is therefore both a practical and a moral imperative to let the state make transparent rules of engagement for private sector co-operation (like we successfully did with renewables) to ensure the outcome of stable supply at a reasonable price.   

But what are some of the ethical considerations for the restructuring and business rescue of Eskom?

The use of public funds to assist Eskom is ethically permissible under conditions of a monopoly SOE. But then the public must have trust in an actual plan to demonstrate that the “black hole” syndrome is halted. It is unethical to simply turn to the taxpayer to continually pay the price for mismanagement and corruption, or to delay a credible turnaround strategy that is closely monitored with feedback to the public.  

The reduction of Eskom’s workforce — subject to due process of law, on a rational basis and without further compromising electricity provision — can be ethically defended. It rests on the utilitarian principle of achieving a greater good for a greater number.

In simple terms: it is immoral of unions to resist retrenchments in principle and even resort to illegal sabotage for protection of Eskom workers. It is not fair to let millions of people suffer for the benefit of redundant workers.

The shareholder has the moral high ground in this matter, but has thus far not demonstrated the political will to do the right thing. Any business relation has at least two parties and ethical business requires both parties to act in accordance with the agreed terms of the contract.

It is therefore unfair to expect Eskom to “save itself” if municipalities and individual consumers who do not enjoy rebates do not pay. To allow the situation to reach the current proportion of private and municipal debt is itself a moral indictment on local government and consumers. (Soweto is in the moral red zone). 

The shareholder (we all know who this is) therefore has the moral duty to support Eskom of its acts to enforce contractual agreements. Because electricity is an essential good, this enforcement needs to strike a fine balance between strategic withholding-interruption of service and suffering by innocent people who might have paid their bills.

Moral formation and behavioural change cannot occur without consequences for those who break the law. We are now a democracy with a legitimate government and we have a collective duty to contribute to the common good.    

We will hopefully see on Wednesday whether the shareholder — represented by the finance minister — has political will and moral courage.  

• Prof Naudé is director of the University of Stellenbosch Business School.