Business Day column: Stagnation no reason for Eskom to celebrate

29 August 2016
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ESKOM is electrifying. Not in the sense that it is electrifying rural areas, or mines and factories, but in a shockingly electrifying sense. It is running ads proclaiming victory in defeat. Demand has fallen so catastrophically that Eskom "celebrated" a year without load shedding last week. We should be weeping, not rejoicing.

There is nothing virtuous about stagnation and poverty. Had the economy grown at the same rate as African market economies, we would be producing and consuming twice as much by now. There is a near-perfect correlation between economic growth and electricity consumption. Prosperity without electricity is virtually impossible. Our electricity catastrophe, and other shocks, caused stagnation. Celebrating this is perverse.

Lest there be doubt, it is not Eskom’s fault. Lamenting our electricity catastrophe is not Eskom-bashing. It is Eskom-sympathising.

Eskom is, like all of us, a victim of perverse political interference. Until 1998, it was relatively free to invest in new capacity. Eskom won the Financial Times Power Company of the Year Award in 2001. But by then politicians had told it to stop building power stations. It warned that without more capacity there would be blackouts by 2007. It was right.

Politicians decided Eskom should be unbundled so that its units and private suppliers could compete with each other on a liberalised "level playing field". But, instead of implementing their plan, they perpetuated the dinosaur inherited from apartheid. They ignored the world, which was ditching outdated monopolies.

Eskom should not be empowered and delighted by the fact that its politically mandated failure plunged us into darkness. To keep the lights on, money was wasted on expensive low-energy bulbs, gas heaters and cookers, costly insulation, solar panels and the like. Lights were on and machines were off. Factories stopped completely or wasted money on low-energy alternatives. Every cent spent on reduced consumption was a cent diverted from better living standards, prosperity, job creation and poverty alleviation. "Energy efficiency" is a misnomer — it means economic inefficiency.

There is acrimonious debate among experts whether less consumption now than in 2007 is due to falling demand or falling supply. It is obviously the latter. Unsupplied electricity cannot be consumed; consumption never exceeds supply. According to official data electricity supply has fallen by about 10%. Up to 15% of our GDP and one to two percentage points of annual growth have been sacrificed on the altar of political megalomania. Guilty politicians now face rising social and political tensions. Had there been electricity sufficiency, everything wasted on reduced consumption would have enriched us.

READ THIS: Will electricity tariff hike by Eskom now be disallowed?

Instead of load shedding, we have truth shedding. When the lights went off in 2007, politicians relented and allowed Eskom to build power stations. But they did not implement the rest of their restructuring and liberalisation promises, not even after repeating them in the National Development Plan.

They said two gigantic power stations, Medupi and Kusile, would be built by 2012 at R50bn each. We have no idea when, if ever, either will be completed, but we do know that they will cost 400% more. Endlessly revised completion dates range from 2017 to 2022. The outdated Department of Energy website still says Medupi will supply power by 2013.

The idea that we "save" electricity by avoiding load shedding is like saying we save food by starving, health costs by staying sick, and money by not earning. Taken to its logical conclusion, the perfect way to "save" electricity is not to consume any. With a return to primitive savagery, we will be perfect savers without load shedding. What we need instead is maximised consumption and sensible politicians.

• Louw is executive director of the Free Market Foundation

This article was first published in Business Day on 17 August 2016

 

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