18 July 2022
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The FMF is an independent, non-profit, public benefit organisation, created in 1975 by pro-free market business and civil society national bodies to work for
a non-racial, free and prosperous South Africa.
As a policy organisation it promotes sound economic policies and the principles
of good law. As a think tank it seeks and puts forward solutions to some of the country’s most pressing problems: unemployment, poverty, growth, education, health care, electricity supply, and more. The FMF was instrumental in the post-apartheid negotiations and directly influenced the Constitutional Commission to include the property
rights clause: a critical cornerstone of economic freedom.
+27 11 884 0270
PO Box 4056, Cramerview 2060
The FMF’s solution to loadshedding: Break Eskom’s monopoly
Talk of establishing a second electricity utility owned and operated by the government to “compete with Eskom” is of grave concern, and only stands to exacerbate the power crisis in South Africa. The Free Market Foundation (FMF) believes there is a solution to the crisis, which starts with a legislative change to a single word in law.
South Africa’s rolling blackouts are caused in the final analysis by Eskom’s de facto monopoly in electricity generation, particularly generation that makes use of coal and nuclear sources of power. No independent power producer is authorised to make use of these sources, giving Eskom a significant leg up over its potential competitors. This monopoly must be brought to an end by, as a start, changing a single word in the Electricity Regulation Act.
Section 8(1) of the Electricity Regulation Act provides that “no person may” generate, distribute, transmit, or trade in electricity without a licence. The FMF submits that “no” be replaced with “any,” meaning the nature of the provision will change entirely. If amended, it will provide that “any person may” generate, distribute, transmit, or trade in electricity without a licence.
Electricity generation and distribution is technically complex, meaning it would not be safe or efficient for any person to simply plug into the grid and start feeding their home-produced power into it. While this might be true, the FMF is convinced that this problem is uniquely Eskom’s and NERSA’s, and potentially that of municipalities.
“These institutions ought to be begging ordinary South Africans to generate power and transmit it into the national grid,” said FMF Executive Committee member Martin van Staden. “And as part of this ground-up initiative, they should be offering to – at their own cost – help South Africans set up these systems and feed excess electricity into the grid safely and efficiently.”
Such an approach would immediately start taking pressure off of the beleaguered national power grid.
The Solidarity Research Institute in a recent case-study found that Vietnam solved its 2007 electricity crisis by looking to ordinary citizens to solve the problem. In a single year, Vietnam added 4,500 MW of capacity to its grid by allowing Vietnamese people to generate electricity at home via solar panels, and to sell excess power back into the grid. This trend continued, and recently Vietnam had to curtail power generation due to oversupply.
NERSA and the Department of Mineral Resources and Energy must look to ordinary South African communities and businesses, and international investors, to bring loadshedding to an end. The idea that another State-owned company could solve a problem that has its origins in statist thinking ought to be abandoned.
In the longer term, independent power producers must be allowed to generate electricity from whatever source they can profitably, safely, cleanly, and efficiently utilise; whether coal, wind, nuclear, solar, or gas. South Africa is not in the luxurious position of being able to pick and choose its sources of electricity.
The Free Market Foundation encourages South Africans to make their voices heard on this matter by sending their proposals and ideas to government through the Dear South Africa public participation platform.