SA has been spared load-shedding — for now — thanks to reforms at Eskom that made its functioning less political and freed it from racially motivated procurement rules. The increased participation of private sector companies producing electricity has also helped. But we aren’t out of the woods yet.
Private power producers have become so effective at generating electricity that Eskom requested in August that they limit electricity supply to the grid, which cost the private companies revenue. This is due to the grid not being able to absorb the sheer volume of new generative capacity.
Krutham MD Peter Attard Montalto has argued that SA needs 2,500km of new transmission lines annually, but Eskom can build only about 300km a year. Attard Montalto argues that the private sector needs to get involved to make this possible.
If transmission infrastructure cannot keep up with electricity demand and the growing supply of electricity, our economy will continue to stagnate. We need access to plentiful electricity to re-industrialise and grow our flagging economy. While the establishment of National Transmission Company SA (NTCSA), separate from Eskom, is a step in the right direction, it’s still not good enough.
There needs to be a concerted effort to allow private sector participation, not just in building transmission infrastructure but also in managing the grid. The NTCSA and Eskom are racked with debt, and there is a constant threat that ideologues in government will once again push damaging policies on the parastatal and continue to use the state-owned enterprise as a source of corrupt revenue.
What matters is delivering quality services to the people of SA at the lowest possible cost to the taxpayer.
The more infrastructure and important utilities we can rescue from under the thumb of the state the better for the economy. This needs to happen to avoid future threats of political meddling, while the private sector also almost always outperforms the public sector. For this to be possible future private sector transmission companies need to be decentralised and in competition with one another.
This can be through completely transparent and reasonable tendering processes where the cheapest and most effective company is chosen to build infrastructure in a particular area. Rather than petty political brownie points such as BEE compliance, the tendering process must prioritise good fundamentals. What matters is delivering quality services to the people of SA at the lowest possible cost to the taxpayer.
Managing the grid and distribution of electricity must also be taken over by the private sector. so as to solve the problem of nonpaying customers. Eskom believes it loses R2bn in revenue monthly to electricity thieves. Not much is done to address that because doing so could jeopardise votes. No municipality wants to enforce electricity payment when doing so could threaten their political power.
Private companies don’t care about votes. They care about payment. And they will enforce payment, or shut down the power if necessary to force compliance. That would lead to a drop in nonpayment and electricity theft, meaning more money for the electricity industry to drive down prices, invest more in generation and transmission, and keep the entire industry afloat.
Eskom has come a long way since last year. But more can be done, and more must be done so we are to avoid future load-shedding and uplift our economy. The private sector has been proven to play a positive role in addressing the generation shortfall. Now we must let it help solve our transmission and distribution problems. SA can only benefit as a result.
• Woode-Smith, an author, economic historian and political analyst, is an associate of the Free Market Foundation. He writes in his personal capacity.
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