YES TO THE PARTIAL PRIVATISATION OF THE ENERGY SECTOR: A LESSON ON DEREGULATION
It is an accepted and scary fact that Eskom has a R225 billion funding shortfall.
Eskom's representatives claim that the only way to reduce the shortfall is to introduce higher electricity tariffs, which will place a further burden on the consumer.
This argument must be rejected.
Any level of privatisation in the energy sector will reduce the financial pressures felt by the State as private investors will be contributing to funding the electricity supply. This will be funding that the sector did not have before. It is therefore logical that the sector's financial arrears will decrease. Further, it is common sense that adherence to the free market drives competition. Even teenagers and first year university students will be able to tell you that an increase in competition decreases prices, increases efficiency and that the more competitors are active in the market, the more people they will have to employ.
International trends indicate that a fully privatised energy sector coupled with excessive regulation (such as in the United Kingdom), leads to a reduction in competitive activity. Price controls distort the market and drive out competition.
However, the situation in New Zealand, which involves minimal government intervention and regulation, despite the existence of both state-owned and privately-owned energy companies providing electricity has seen consumers reap the benefits.
A reduction in regulation in New Zealand has seen electricity prices controlled and dictated by market forces, such as the law of supply and demand. Energy security (something consumers do not feel Eskom provides adequately as seen by the rolling blackouts), is high in a deregulated system where providers of electricity have to compete for consumers.
Eskom often instructs its customers not to use its product; a situation which is both sad and laughable.
The existence of a single buyer of electricity is a socialistic planning mechanism. Countries with high economic freedom experience high growth rates and high levels of economic prosperity. What is desperately needed is an increase in competition, less intervention from government and reduced regulation.
The obligations of all players in the industry should be clearly defined so that investments in capital projects and the reasons therefore are easily accessible.
The National Energy Regulator should perform an oversight role.
For any privatisation to be considered, the Independent System and Market Operator (ISMO) Bill, must first be passed in Parliament.
The Bill has debated and passed by the energy committee, and rumours are that Ministers are preventing its consideration before Parliament.
The partial privatisation of the energy sector while simultaneously deregulating the industry will provide benefits for all South Africans.
Michael Shackleton is a DA PR Councillor in the Tshwane Metro
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