Only Capitalism Can Save Eskom

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Well, not really. Capitalism cannot save Eskom. The power utility is by its nature anti-capitalist. Capitalism can, however, achieve what Eskom’s primary goal was at its inception in the 1920s: To keep the electricity flowing to South Africans.

In my essay on the origins of Eskom’s failure, I identified that Eskom’s main defect was inherent in its nature as a state-owned enterprise that will not and cannot participate in a proper free market. As a result of this, it fails to account for prices, fails to plan effectively and, succinctly, fails as a company and utility.

Eskom fails because it represents the antithesis of capitalism. It does not need to compete with others. It does not want nor does it need to turn a profit. It appoints its staff and leaders based on political considerations rather than merit. Eskom represents what socialism and state-planning can accomplish: Dismal failure.

Electricity is too important a resource to let an incompetent monopoly dominate. Since loadshedding entered the South African lexicon in 2008, anyone with a little sense has realised that Eskom doesn’t know what it’s doing.

The lights keep going off. Power plants fail to be built. Rocks painted black are bought from cronies as if they’re coal. And still Eskom blames “wet coal”, as if that excuses them of fault.

South Africa is on the brink of total grid failure. Already, industry, commerce and even simple residential life has ground to a halt, as we spend over a quarter of the day in darkness. If the power never comes back on – which is a distinct and terrifying possibility – then we won’t just be an African banana republic anymore, but a medieval peasant society.

We shouldn’t let morons destroy the tenuous civilisation we’ve built at the tip of Africa. We need to let capitalism save the country and our society. The following policies need to be enacted, among others, if we are to have any sort of hope:

Hold non-payers accountable: While most South Africans are being hit by loadshedding, there are particular non-paying municipalities that are responsible for mountains of the debt owed to Eskom. Some of these municipalities have corrupt officials to blame, who have pocketed public funds meant to go to the power utility, but we must not excuse the many consumers who have simply gotten away with not paying for electricity. On both a municipal and consumer level, non-payers should be held accountable. If someone can’t pay, the lights should be switched off. Prioritise loadshedding for non-payers over payers.

Privatise Eskom: Nothing will change until Eskom is privatised. Preferably, it needs to be unbundled, segmented into a variety of small packages, and then sold to the highest bidders. In addition, it should be sold on the open market, disallowing the state from selling it to cronies. Money should be the priority here. At least we can hope that if someone can afford to buy a power plant for a lot of money, they can afford to run it.

Allow private competition: Privatising Eskom will be pointless if it remains a monopoly. The root of Eskom’s problems lies in its monopoly status, so to get over this problem, it needs to face free market competition. The Electricity Act must be scrapped and private producers on all levels should be allowed to feed electricity into the grid.

Decentralise the grid: If the grid itself isn’t privatised, then it must at least be decentralised as much as possible. Municipalities, cities, and even electrical zones should be responsible for handling their own purchasing, sale and distribution of electricity. This will make corruption isolated and easily noticeable. Most importantly, it will also mean that non-paying municipalities won’t affect prudent municipalities.

Deregulate and de-tax: The electricity industry, abilities to go off-grid, and alternatives to electricity must be deregulated as much as possible and have taxes reduced or ideally removed. No VAT should be payable on electricity. It is an essential good, and having the government steal even more of our money hurts everyone on all levels, particularly the poor who pay for their power. Gas and solar panels should also not be taxed. Let people make their best efforts to survive without the government trying to steal all their cash.

The only way that we will come out of this electricity crisis with the lights on is if we embrace freedom and sound economics. As South Africans, we need to be louder. We need to be angrier. And we must demand a lasting and solid solution to this disaster.

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