The recently announced structural reforms offer an exciting opportunity to transform and make our economy competitive. Simultaneously, wrongly implemented, they can serve to accentuate the current iniquitous trajectory that will plunge our country into a social explosion.
By way of the background, President Cyril Ramaphosa announced – during the Presidency budget vote – that private business will be allowed to generate as much as 100 megawatts of its own embedded energy; and Transnet is preparing proposals to enable private sector or third party operators access on its ports and rail infrastructure.
A month ago, the government announced that 51% of state-owned airline, SAA, had been sold to a black African consortium, Takatso. This transaction has since been mired in controversy because of the way it was conducted and is now subject to litigation.
Allowing the private sector to generate its own energy will, in the medium term, lessen the burden on the constrained national grid, Eskom. That is an upside, given the ageing fleet of the national power utility.
Similarly, allowing the private sector to operate on Transnet’s infrastructure – rail and the lucrative container terminals – is likely to inject much-needed competition and stimulate efficiencies. These outcomes will, ultimately, benefit consumers and improve the competitiveness of the economy.
However, there are real dangers of unintended consequences eventuating from the implementation of these reforms. Let’s take energy first. The most obvious negative implication is that big business – intensive energy users and paying customers to Eskom – will just use this window to bail out completely from the national grid. And that will leave struggling small businesses and highly indebted households as core clients of Eskom.
That will worsen its financial problems and hasten the collapse of coal-fired power stations which have already become the bogeyman for advocates of clean energy.
Also, allowing large multinationals to exploit Transnet’s infrastructure will have the unintended result of benefiting them. The same argument applies to the allocation of high-demand spectrum on an auction basis, once the litigation ends.
These adverse outcomes are avoidable and we urge policy makers to ensure that due care is applied in implementing them.
As with Eskom, big business has a duty to ensure the transition to clean and alternative energy generation is just and fair. Among others, this means that we cannot abandon the transformation project. Put differently, the opportunity to generate a corporation’s own energy is a further chance to diversify both its supplier and partner base.
As well as ensuring that major corporates source supplies from black African suppliers to generate its own energy, this is also an opportunity to bring in new black African partners in the generation space.
Recent research has shown gaping holes in the management and control of the economy. This needs fixing.
With Transnet, it would be vitally important that qualifying criteria for private sector participation include a requirement for black African partners and local small firms over and above the technical and financial requirements. That way, we ensure the transformation project remains front and centre of this economy.
In due course, Eskom will be split into three subsidiaries – for generation, transmission and distribution – with one holding company. This means four boards of directors and management teams. The most obvious benefit of this split is to bring transparency into the performances of each of these subsidiaries.
As the only shareholder, the government should ensure that the control boards and management teams of these Eskom entities are majority black African.
These are exciting times in our country. These reforms offer us another opportunity of taking major steps towards making our economy inclusive, transformed and transformative and competitive.
We should use them as a building block towards the goal of ensuring that the economy is owned 75% by the black African majority.
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