NICHOLAS WOODE-SMITH: Electricity privatisation is already happening

Privatisation is not only the only real solution to SA’s electricity crisis, it is so obviously necessary and powerful that it is happening whether the government likes it or not.

Former Eskom CEO André de Ruyter estimated before he resigned that the private sector had already put 66,000MW of renewable energy projects in development. This is 25% more than Eskom’s entire electricity capacity.

On top of this, more and more South Africans are going off the grid, with more than 4,400MW of solar being installed by private citizens. This is expected to rise exponentially in the near future.

Rand Merchant Bank (RMB) argues that at the current rate of private investment and development in electricity generation the private sector will be producing more electricity than Eskom by 2025. Other experts have corroborated these findings.

This positive news comes as Eskom takes enormous proportions of its generation capacity offline to catch up on maintenance, yet is still unable to keep up with decaying plants and infrastructure. Apathy, corruption and sheer incompetence have plagued the parastatal, and all of government, for decades. But as long as we stay on this course Eskom will become increasingly irrelevant.

Our solution all along, as so many experts and classical liberals have been saying for decades, has been privatisation. And while the government still insists on retaining state ownership over Eskom, its monopoly is becoming less meaningful. But we’re not out of the woods yet. This government is overwhelmingly corrupt and ideologically bent on not just ensuring state dominance over the economy but also on ensuring the destruction of the free market.

While the private sector and citizens are easing the burden on the grid, it is not beyond comprehension that the government will once again restrict private sector generation feeding into the grid. If this happens, not only will an ungodly amount of private investment go to waste, it will also mean we’ll be fully reliant on Eskom and its inadequacy once again.

Transmission system

Even without the government backtracking, there is still the problem of transmission. While the private sector can develop new generative capacity, companies are still beholden to an Eskom and municipal-owned transmission system. Much of the problem with SA’s electricity economy arises from this stage of the process.

Many municipalities have been deeply corrupt, apathetic about paying their debts, and simply refuse to pay for electricity they have used, often because they have delivered electricity to non-payers on an enormous scale.

One of the virtues of the free market is that the incentive to produce a good is based on being paid. There is no political threat. So, while the government may fear charging nonpayers because the governing party wants their votes, a private company won’t care. It just wants its money because it needs that money to keep the business afloat.

Wherever it can be, transmission must be privatised. The grid must be put under private sector control so that it can collect debt effectively and insist on payment for services rendered and products sold.

As was promised, the private sector is coming to the rescue. SA has a robust, entrepreneurial and inventive gallery of private companies and investors. They only needed to be given the green light to provide the solution to our problems.

All that is needed now is for the government to get out of the way completely. Eskom must give up on its vain attempts to retain its monopoly. Its assets should be auctioned and its grid privatised.

Our business people and industry have proven that they are far better at doing Eskom’s job than Eskom itself. So let’s let them replace Eskom entirely. If this happens, load-shedding won’t end by 2025. It could end this year.

• Woode-Smith, an author, economic historian and political analyst, is a contributing author for the Free Market Foundation. He writes in his personal capacity.