Media release: For radical economic transformation in energy, adopt the 1998 White Paper

26 May 2017
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In almost every sector of the South African economy, radical economic transformation (RET) is urgently required. The Free Market Foundation (FMF) is grateful to President Zuma and the ANC for putting RET centre stage of public discourse as South Africa urgently needs to adopt a different – radical – approach, not to merely tweak the edges while doing more of the same.

A radical policy would be to discard the recipe followed by the Apartheid government and immediately remove or drastically lessen the role of government in energy. The radically transformative 1998 White Paper proposed introducing competition among suppliers and giving South Africans the right to choose their electricity supplier. It was never implemented.

Energy is the engine that drives economic growth, attracting job creating foreign and local investment. South Africa’s energy industry is in dire need of radical economic transformation to get rid of the apartheid dinosaur, Eskom. Created in the 1930s, this massively inefficient and sprawling monolith continues to dominate and control the energy market despite its lack of profitability, questionable business practices and its continued drain on the fiscus.

To start, radically overhaul the Electricity Regulation Act (ERA) that actively discourages radical economic transformation because it protects Eskom from competition and secures its monopoly, damaging consumers and the economy. FMF executive director and active campaigner for real radicalism, Leon Louw said, “Far from keeping the lights on in the face of rising demand from a growing economy, Eskom’s solution to the energy crisis is to encourage users to use less. It is like Pick n Pay telling its customers to buy fewer groceries as a means of maintaining full shelves”.

The ERA prevents competition at any level. For example, unlike in other developed countries, no small electricity producer in South Africa, generating a surplus of power, is allowed to sell electricity to a neighbour. No one can buy electricity other than from Eskom or municipalities supplied by Eskom and at Eskom inefficient prices.

Another radical idea proposed by the FMF and supported by many experts is to sell the electricity transmission grid in whole or in parts to private providers. This would supply much-needed capital to finance the building of new power stations or to pay off debt and reduce the burden on the fiscus.

South Africa can brag of many successes in radically transforming citizens’ lives, but we rarely hear about these from government. Two of the many examples are: between 1995 and 2007 there was a 66% increase in back enrolment at South African universities so that, today, black students outnumber their white counterparts by nearly 300,000; also, black South Africans’ disposable income between 1996 and 2009 increased by 79% while white disposal income increased by 28%. There is still much to be done that can only be done by a government willing to be radical.

The key to real radical transformation is to open markets, including energy, that will free citizens from intrusive financial and consumer regulation, free business from red tape, repeal repressive labour laws, encourage competition, reduce government interference and provide the environment for entrepreneurs to flourish. Now that would indeed be radical.

Ends

Note to the Editor

This media release is 4a in a series of 10 in which the Free Market Foundation (FMF) will provide alternatives to the various policy discussion planks of the African National Congress’ 2017 National Policy Conference.

Previous media releases in this series:

ANC Conference must adopt real radical economic transformation – not more of the same paternal statism

ANC Conference must reject ICT White Paper and Hate Speech Bill for South Africa to drop Apartheidesque communications policy

Radical economic transformation means South Africans keep and control their own money

You can access more in-depth documentation regarding the above on the FMF’s website:

FMF submissions to the High Level Panel on electricity: http://www.freemarketfoundation.com/publications-view/submission-to-high-level-panel-on-electricity-%E2%80%93-overview

http://www.freemarketfoundation.com/publications-view/submission-to-high-level-panel-on-electricity-regulation-act-and-national-energy-regulator-act

 

The FMF will be hosting a media briefing on 21 June 2017, which will provide an overview of the FMF’s alternatives as well as our vision for Radical Economic Transformation

 

 



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