Nigeria, our competitor for the title of biggest economy on the continent, concluded the liberalisation and privatisation of its electricity supply last year.
Nigeria, our competitor for the title of biggest economy on the continent, concluded the liberalisation and privatisation of its electricity supply last year.
This resource-rich country was not motivated by any idea of “people’s capitalism” inspired by Maggie Thatcher, but by desperation.
Nigeria has more than three times the population of South Africa and manages to produce less than a tenth of the electricity.
No one is seriously talking about privatisation in South Africa.
Our problems are nothing like Nigeria’s, yet we do have power problems.
Ordinary citizens were not impressed by the return of power outages last week as Eskom declared an emergency.
Nor were they impressed with Eskom’s excuse.
Blaming wet coal is a bit like Makana municipality blaming pump failures for water cut-offs. These are explanations, not excuses.
The reason wet coal led to power outages is that, as CEO Brian Dames emphasised at the end of last year in a video that you can see on Eskom’s website, “… the gap between supply and demand is extremely narrow and … high levels of plant maintenance are required”.
Many power stations are old and the building of new plants is behind schedule.
Just as you should have more than one pump for a water treatment plant, the gap between supply and demand should not be so high.
Through the 70s, 80s, 90s and part of the 00s, wet coal or not, the lights were on.
Eskom has managed to stave off power outages, or its euphemism “load shedding”, for the moment.
Eskom is acutely aware of the political consequences of South Africans not having electricity in their homes, and has made extraordinary efforts to get us all to use less electricity, especially at the peak time of 5pm to 9pm.
In all Eskom’s publicity material great stress is laid on Eskom’s ability to “keep the lights on”.
The way Eskom has dealt with the power problem is by asking business to cut back when outages threaten.
In the first stage of an emergency, big power users are asked to reduce demand by 10%, power hungry aluminium smelters cut their electricity use and exports of electricity are curtailed.
In a level three emergency, such as we had last week, businesses and municipalities are asked to cut 20%.
What must have saved Eskom from an embarrassing continuation of the rolling blackouts of 2008 was the global financial crisis, which plunged South Africa into steep recession in 2009, the first time for decades, and dampened growth since.
Could we have continued growing at the rate of above 5% that we achieved in 2005-2007 without the electricity to power that growth?
Perhaps we would have considered privatising Eskom, as the Nigerians have privatised their power utilities.
I am reminded that in the late 1980s I asked then Eskom chairman Johan Maree at a Press conference if Eskom was being considered for privatisation, then an obsession of the PW Botha regime.
He appeared to find the answer amusing, and answered something to the effect that if it ain’t broken, why fix it?
I’m glad that Eskom remained state-owned then, because it is a monopoly, and the only thing worse than a State monopoly is a private sector monopoly, as an adviser to Thatcher’s government once noted.
The benefit of privatisation lies in creating a competitive environment, and with something as capital intensive as electricity generation that is not easy.
Competition would not necessarily reduce prices in the short term.
The private sector manages demand by putting up prices, not by politely asking you to switch off your pool pump.
It is not in Eskom’s interests to have competitors, which may be why it has taken so long to conclude agreements with independent power producers to provide more capacity to the South African grid.
Getting power from these producers, which now contribute only around 6% of total electricity generating capacity, is one of the things Eskom has been tasked with, but electricity from the gas-fired IPPs is expensive.
The power crisis and the environmental lobby has put pressure on Eskom to boost renewable energy, but at present hydropower only accounts for 1.4% of capacity, and wind power is negligible.
Coal-fired power stations still produce 85% of our electricity.
A private company risking the huge sums needed for coal-fired power would want a good return on its investment.
Should Eskom not cope with demand, and blackouts increase, more of us will buy generators.
Privatisation of water supply in two SA provinces in the previous decade elicited fierce union resistance.
Yet here in Grahamstown many of us have resorted to installing rain-fed water tanks and buying filtered water to drink because the local supply is both erratic and suspect, not to mention slightly unpleasant.
Unintended and expensive privatisation has, in a sense, already taken hold.
