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Privatise Eskom
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ToxicBunny
Oi! Leave me out of this...
Yeah, privatising Eskom now would be absolutely the WORST thing they could do...
Prices would go throught the roof overnight and we'd be in a worse situation.
Prices would go throught the roof overnight and we'd be in a worse situation.
Privatizing Eskom is probably one of the worst ideas I have heard in a while -- think about it , with supply and demand setting prices and the cycle time for new generation so long how would it be possible to have the freemarket kick in overnight? It would be in Eskom's best interest to keep supply as little as possible....
What can be done is to start opening up two sectors slowly -- independent generation (forcing Eskom to make deals with private generators, enabling private enterprise to generate and sell power) and independent distribution (well distribution is mostly in municipal hands at this stage anyway).
A little later on, Eskom should not be forced to buy power from independent generators, but they should be forced to carry the power -- e.g. scenario as folllows:
1) Farm X decides to buy power from Acme Power Generation Company
2) The Farm taps the Eskom grid, Acme pushes power into the Eskom grid, Farmer pays Acme.
3) Either Acme or the Farmer pays Eskom for distribution.
Distribution companies would make sense if they took distribution over from municipalities or they target mines, industrials etc. for redundant power supply. But in general it doesn't make sense to build two independent power networks in the same country.
What can be done is to start opening up two sectors slowly -- independent generation (forcing Eskom to make deals with private generators, enabling private enterprise to generate and sell power) and independent distribution (well distribution is mostly in municipal hands at this stage anyway).
A little later on, Eskom should not be forced to buy power from independent generators, but they should be forced to carry the power -- e.g. scenario as folllows:
1) Farm X decides to buy power from Acme Power Generation Company
2) The Farm taps the Eskom grid, Acme pushes power into the Eskom grid, Farmer pays Acme.
3) Either Acme or the Farmer pays Eskom for distribution.
Distribution companies would make sense if they took distribution over from municipalities or they target mines, industrials etc. for redundant power supply. But in general it doesn't make sense to build two independent power networks in the same country.
I think a huge part of the problem seems to be not just the power stations, but also the quality and stability of the entire distribution grid/network itself. Even if the private sector built new power stations, if they still had to rely on Eishkom's distribution network, there'd be trouble. I'm in favour of privatisation but it would have to be done carefully. The private sector could be most useful for more localised sources/distribution, e.g. perhaps providing to industry/mining (assuming our mining industry doesn't collapse in the meantime). Definitely things they must at least do to at least get things started is allow people to sell surplus back to the grid, so e.g. a company which installs solar or whatever could do so.
Knowing our government, their definition of "privatise" also seems to be to structure as a private company, but then retain almost majority government ownership, and pass laws that effectively prevent competition anyway - as they did with the Telkom disaster - almost the worst of all possible worlds. They have a different definition of "privatise" to the rest of the world. But there are MANY different ways to screw up "privatisation" (deliberately or otherwise), and still technically be able to call it "privatisation" (e.g. cf. London Tube's maintenance), as if the mere word "privatisation" prevents all ills. What one is looking for is a "free market", not "privatisation" --- and in fact, the latter is not even a requirement for the former, as China demonstrates.
In the end though privatisation may be the ONLY CHOICE if your government is incompetent, as ours is. One can cry "government should rather" all you want, it's completely useless if they're just not capable, then that's just not on the cards --- privatisation is thus left as the one and only option.
Knowing our government, their definition of "privatise" also seems to be to structure as a private company, but then retain almost majority government ownership, and pass laws that effectively prevent competition anyway - as they did with the Telkom disaster - almost the worst of all possible worlds. They have a different definition of "privatise" to the rest of the world. But there are MANY different ways to screw up "privatisation" (deliberately or otherwise), and still technically be able to call it "privatisation" (e.g. cf. London Tube's maintenance), as if the mere word "privatisation" prevents all ills. What one is looking for is a "free market", not "privatisation" --- and in fact, the latter is not even a requirement for the former, as China demonstrates.
In the end though privatisation may be the ONLY CHOICE if your government is incompetent, as ours is. One can cry "government should rather" all you want, it's completely useless if they're just not capable, then that's just not on the cards --- privatisation is thus left as the one and only option.
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bekdik
Honorary Master
Wasn't Telkom privatized and wasn't it raped and pillaged by the Americans?
P
Picard
Guest
I think it is privatised. The only problem is the government owns most of the shares.
Yes and no. Telkom was "privatised" only in the most loose and technical sense --- there was NO FREE MARKET - do NOT confuse this with what normal human beings refer to as "privatisation" (as opposed to the corrupt government definition). This rape and pillage was effectively allowed only because of the extremely heavy government protection of Telkom against anything remotely resembling competition while government retained 40%, not even allowing other private owners to prevent the pillage. If competition had been allowed, or other private owners had been allowed to purchase other Telkom shares, things would surely have gone very different ways - there were other large companies practically foaming at the mouth they were so desparately trying to get in and compete with Telkom (Eskom/Transtel for example, and for one, even pissed away a fortune on a huge fibre infrastructure, hoping blindly and ultimately fruitlessly that government would throw the market a bone, which they never did).
Sadly, this corrupt tragedy then gets paraded as an example of why 'privatisation is bad' by people who don't understand the issues.
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bekdik
Honorary Master
@Turtle And why would the privatization of Eskom proceed any differently? It's the same government.
Moederloos
Honorary Master
Not going to make an difference - still going to have appointments based on political ties, rather than ability to do the job.
km2
Expert Member
Glad to see everyone here is opposed to privatising Eskom, thought I might come across as "the lone communist" 
There's no way that private industry would be able to raise the R700bn in capital needed to build power plants in the time scale that is needed here. Not to mention that the whole liberalisation process would add another four years of red tape before anything could even happen, and we'd have to find R700bn in capital from "people who look like the minister" Alec Erwin... er, that's not right.
Building large, capital intensive, but slowly evolving industries like power is what governments should be perfectly capable at. The metrics of success are very simple, power generated > power used, and if you don't achieve that you just keep throwing money at it till you do. Telecoms is different because there's an element of innovation where you need to roll out new services like ADSL, and governments tend to be rubbish at innovating.
This is just pure and simple incompetence, not some private vs public enterprise thing.
There's no way that private industry would be able to raise the R700bn in capital needed to build power plants in the time scale that is needed here. Not to mention that the whole liberalisation process would add another four years of red tape before anything could even happen, and we'd have to find R700bn in capital from "people who look like the minister" Alec Erwin... er, that's not right.
Building large, capital intensive, but slowly evolving industries like power is what governments should be perfectly capable at. The metrics of success are very simple, power generated > power used, and if you don't achieve that you just keep throwing money at it till you do. Telecoms is different because there's an element of innovation where you need to roll out new services like ADSL, and governments tend to be rubbish at innovating.
This is just pure and simple incompetence, not some private vs public enterprise thing.
Based on all the evidence and their track record ... it won't, and frankly, looking at all the facts that present themselves, it seems we're most likely screwed. Either accept it and get yourselves personal/business solar/generator/UPS and hunker down for progressively increasing anarchy or start packing and head for civilised pastures.
While there are still plausible "best-case scenarios" in which collapse can be averted and the country manages to continue growth in the long term, these seem increasingly unlikely. And the negative scenarios, many looking distinctly possible right now, are almost unthinkable nightmares --- I'd like to go into details here but will refrain. It does not look good though, it's scary.
km2, I both agree and disagree. If run well, state-run electricity *can* be done well (as it was here in the past). However in principle I am still for privatisation though, as I believe in freedom, and there is no reason why it should effectively be against the law for anyone to be able to sell and distribute energy generated in any form, such as electricity (the very idea is an abomination, actually, if you think about it - if I install solar panels, I can't even sell some to my neighbour in a private trade? Insanity.). State-run power can have advantages though, for sure, IF done well, but IN ADDITION to allowing people freedom too. However I don't think the government is capable of implementing the very *privatisation process* properly, it'll just into another huge grab for kickbacks and various political finger-in-pie scenarios and a nightmare of red tape and years of delays and bureaucracry (sp?) as every little group who vaguely ever even heard about this "electricity" thing or has seen a light bulb gets to have their say and various politicians etc. get more opportunities to be corrupt and get rich etc. On the other hand, I also don't think the government is capable of implementing state-run electricity properly, either (that's not even opinion anymore, it's indisputable fact). What does that mean? Well, simple, an ineffective government approaches a de facto or definitional anarchy. In other words, if things get worse, then everyone who needs energy will simply have NO CHOICE but to just bypass the government entirely and do it via the "private sector" anyway (even if it's against the law at that point, if you don't have a choice, you don't have a choice). The only *other* 'other option' (short of annexing some land and starting a new government) is change the current government - but what chance of that? You can't even get half these lards here to vote, let alone display even a remote interest in that "boring" abstract thing people call "politics", and that for some reason people think doesn't affect them.
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Moederloos
Honorary Master
May I ask that you do?
Perhaps a separate thread.
It is not, IMHO, a good idea to pretend that nothing is wrong. Had we all stood up and shouted this loudly from the "bolt days", we may have averted this altogether.
I believe that we need to embarrass our "leaders" internationally, and we need - for as long as this crisis remains and heads do not roll - to dissuade investment in ZA.
Sapphiron
Honorary Master
THe solution is to throw the market wide open, Do away with power generation licenses.
if you've got the money and you can meet all the environmental requirements. Build a power station and sell it at the price you want.
Prices won't go up if it is completely open.
in general we have a very healthy IT hardware market, because everyone and anyone can sell hardware.
Do the same with energy
BUT MAKE IT OPEN TO ANYONE!!!
PS Do the same with telecoms while your at it.
if you've got the money and you can meet all the environmental requirements. Build a power station and sell it at the price you want.
Prices won't go up if it is completely open.
in general we have a very healthy IT hardware market, because everyone and anyone can sell hardware.
Do the same with energy
BUT MAKE IT OPEN TO ANYONE!!!
PS Do the same with telecoms while your at it.
At the moment I wouldn't even mind if it was more expensive, so long as it was reliable and well-run.
Well, we've heard from more than Eskom spokesperson that the *entire system* is currently highly vulnerable - the need to shut down the mines (in fact, 138 'key industrial customers' ) suggests to us how serious this is. This isn't just a few stations running at less than optimal output --- this is probably a significant portion of entire network that has fallen into disrepair and stopped being maintained properly, plus there's a lack of skilled manpower to fix this. We already know that Eskom is not capable of maintaining this network (otherwise we wouldn't be where we are). Will their capability change dramatically in one month? And how can it really, if we continue on with the current Eskom management, who we already know are basically just dangerous incompetent crooks who've been pilfering the coffers for the last ten years?
Now the best-case scenario is that within four weeks they manage to repair whatever's currently seriously damaged and manage to improve their maintenance *capabilities* as well as the robustness of the grid, and that the mines at least can continue with reliable power, and that we struggle through with rolling blackouts for five years or so and then the situation starts getting better. Within the next few months they must also implement a rationing system and other schemes (does that even sound plausible? they haven't even been able to bill us correctly in the past).
But if this seemingly unlikely best-case scenario doesn't come to pass ... stopping the mines for a full month or more will not only be a massive national and international embarrassment to the government, it will be economically devastating. There is going to be immense pressure to somehow "make the system work" --- will reckless decisions to push the system at its limits and "hope for the best" be made, out of desparation? What could happen then: (a) Mines restart operations on an unreliable grid --- even one blackout then could cause severe accidents with major loss of life. (b) The entire power system could fail even worse, leaving us with far less power even, and the almost definite collapse of the mining industry. If the government is unable to improve the situation for industrial customers in four weeks (their current claim, "two to four weeks"), then the South African mining industry could well also start to collapse anyway (I don't know how long they can feasibly "pause" operations before the entire thing becomes pointless and they have to stop anyway). So if the electricity problems don't get fixed, then we could soon be looking at a largescale collapse of most of our mining industry. I'm estimating (very roughly) that such a collapse could cause an immediate loss of perhaps 50,000 or so jobs, and within another few months, I'd guess the loss of perhaps between 100,000 and 200,000 additional jobs (these are rough guesses), not to mention massive financial losses/write-offs. Actually I personally think a true worst-case scenario for the country - looking quite plausible to me right now - could see the economy shedding as many as half to one million or so jobs within just two to three years (if not more, even, if our electricity infrastructure disintegrates much further). This is a horrific prospect. Our economy, while big, is too fragile to afford that, especially not with the burgeoning population of unskilled illegal migrants (estimates of over ten million) that we're already "supporting" --- crime levels would spiral *much* higher, while the police service's ability to fight crime would be further hampered by having no/less electricity, combined with sheer overload, combined with the government's plan to kick even more whites out of SAPS ASAP.
Merely stopping mining for four weeks is a catastrophe in its own right. Apart from the huge losses we're incurring, this is certain to result in less foreign investment, and some foreign divestment, all driving up the deficit even further. The Rand will weaken severely and rapidly. Inflation, already high, would be affected badly by this (interest rates are gonna skyrocket) and could easily quickly leap into double-digits; I wouldn't be surprised to see CPIX approaching the 15-20% range within one to three years (conservative) and who knows from there. With electricity problems and even higher crime levels, our tourism industry will be gutted (this electricity stuff is making international news, and already it's causing an impact on tourism), driving unemployment even higher. We could also lose the 2010 soccer too if the problems aren't fixed soon. The prospect of possible collapse, or even just five more years of power cuts, is going to drive some businesses to leave and will also trigger a new mini-wave of emigration. Our property prices, instead of leveling, are now more likely to start dropping - a lower property value combined with a much weaker Rand, your house could be worth very little (e.g. if/when you do decide to leave). If a widespread sell-off is triggered in the market, it could be like a bubble bursting - increased demand from more selling pushes prices further down. A full-on economic downward spiral, the worst-case scenario, seems quite feasible. More skilled people leave. More production collapses. Rand slides further. Inflation climbs higher. Tax base shrinks. Less money and fewer skilled people to maintain Eskom and other infrastructures. Etc etc. In no time at all you are Zim#2. And SA contributes an estimated 25% of Africa's GDP, and we provide many products to the rest of Africa ... if/when this ship starts sinking, it's not going to be pretty for Africa as a whole. A sinking SA, pilfered by an even more corrupt next government, could also trigger all manner of other political instability. (And don't forget we have a nuclear reactor down here :/)
And think about what about other things that need electricity ... apart from e.g. manufacturing (huge itself), what about e.g. Gautrain construction, and also running of Gautrain, is the train going to stop randomly, how useful will that be? And what about waste-water management, for example? If they can't get electricity, we're going to see our great clean water system go upside quickly. Sewerage processing, pumping of water to drier areas, etc. Imagine the disaster if our water management collapses. Already we're starting to see signs that our water system is being mismanaged, perhaps as badly as Eskom, who knows. And we don't have a lot of water in SA, the only reason we can provide so many people with clean water is the very careful and sophisticated management we've had in place. How many skilled people are going to stick around when the water processing system rots too?
If you ask me, things do not look good at all at the moment. My advice, 'run'. (But you see, a 'panic' now would make things much worse.) Even if not, this seems like a good time to stop spending frivolously and save your money.
It seems already inevitable to me, at any rate, that the Rand is going to weaken notably soon and inflation will worsen too; I suspect we'll see an interest rate hike Thursday. Also keep in mind this all comes at a time when the global economy seems to be cooling off - which affects our economy too. And it also coincides with local political uncertainty (Zuma issues) and e.g. the dismantling of the Scorpions.
(Disclaimer, I'm NOT an economist nor am I qualified as such, I'm just 'some guy' spouting an opinion.)
Dissuade investment this will, don't you worry. And that will be part of a 'downward spiral'.
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No!
Absolutely No to Privatisation!
Never mind the fact that we will be paying substantially more for Electricity, the third of the population that have still not got Electricity will be waiting for the cows to come home. No Private Company is going to Electrify poor communities and that is the reality of our country and most of Africa.
Electricity Capacity must and should always remain a Public Utility.
We cannot afford to have another Telkom Fiasco.
Government must stop absorbing Eskom Dividends and rather reapply it back into infrastructure like they should have done in the first place. That is why it is a Public Utility, supposedly non profit orientated too boot, although that has been sidestepped over the years.
I think Government is getting so much flak at the moment which might awake some sleepy Officials to actually do something.
Many of the new Black Shareholders in the Mining Industry certainly don't want to lose value in their shareholdings. Nobody does for that matter.
The Load Shedding is going to hurt the Mining Industry the most.
Time will tell. Not all is lost yet. Eskom must now just pull finger. Trek vinger met ander worde.
Absolutely No to Privatisation!
Never mind the fact that we will be paying substantially more for Electricity, the third of the population that have still not got Electricity will be waiting for the cows to come home. No Private Company is going to Electrify poor communities and that is the reality of our country and most of Africa.
Electricity Capacity must and should always remain a Public Utility.
We cannot afford to have another Telkom Fiasco.
Government must stop absorbing Eskom Dividends and rather reapply it back into infrastructure like they should have done in the first place. That is why it is a Public Utility, supposedly non profit orientated too boot, although that has been sidestepped over the years.
I think Government is getting so much flak at the moment which might awake some sleepy Officials to actually do something.
Many of the new Black Shareholders in the Mining Industry certainly don't want to lose value in their shareholdings. Nobody does for that matter.
The Load Shedding is going to hurt the Mining Industry the most.
Time will tell. Not all is lost yet. Eskom must now just pull finger. Trek vinger met ander worde.
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I have to agree. Privitisation of an essential service is an absolute no-no.
South Africa has the fourth cheapest electricity in the world. A fact that will no longer be true if a foreign investor sticks their finger into the socket.
The fiasco that is Telkom will seem like a daydream compared to the nightmare that will ensue if a private company starts providing SA's electricity with no competition in sight and so many wallets to mine.
South Africa has the fourth cheapest electricity in the world. A fact that will no longer be true if a foreign investor sticks their finger into the socket.
The fiasco that is Telkom will seem like a daydream compared to the nightmare that will ensue if a private company starts providing SA's electricity with no competition in sight and so many wallets to mine.
I always see this privatise vs nationalise debate and wonder if people realise there's a 3rd option:
Deregulate and open the market completely; however, run a state subsidised, non-profit (shareholderless) supplier in parallel. Private companies can feel free to compete against the nationalised supplier - however they'll have to innovate/reduce costs to stay profitable (usually not too hard).
BTW, I would see this working as a possible telecomms solution, too.
Deregulate and open the market completely; however, run a state subsidised, non-profit (shareholderless) supplier in parallel. Private companies can feel free to compete against the nationalised supplier - however they'll have to innovate/reduce costs to stay profitable (usually not too hard).
BTW, I would see this working as a possible telecomms solution, too.
I would agree with you hexagon if this was not this day and age in South Africa.
We are too far down the line to change gear now.
Having said that I wonder if IPSA will be able to make their Power Business in the Eastern Cape profitable. They got in at the right time imo. They must just produce some power and they will be in the money.
It is extremely expensive to build Power Stations and with South Africa's BEE/AA requirements just complicates things a bit. Hence my comment above about this day and age.
I still hope somebody is successful in providing power other than Eskom. I just don't see it happening any time soon and that is what we need. More power now.
We are too far down the line to change gear now.
Having said that I wonder if IPSA will be able to make their Power Business in the Eastern Cape profitable. They got in at the right time imo. They must just produce some power and they will be in the money.
It is extremely expensive to build Power Stations and with South Africa's BEE/AA requirements just complicates things a bit. Hence my comment above about this day and age.
I still hope somebody is successful in providing power other than Eskom. I just don't see it happening any time soon and that is what we need. More power now.