The Worst of Both Worlds: Between Public and Private Delivery in the Post-Apartheid South African Electricity

This paper examines the record of the South African state in improving access to electricity since the end of apartheid in 1994, contributing to an emerging literature on the delivery of essential goods and services which comprise the foundational economy. The argument of the paper is that the state’s ability to meet basic needs in electricity has been hampered by two major factors. Firstly, the contradictory commercial and developmental objectives of the state electricity generating and transmission company, Eskom, and secondly the rent-seeking behaviour of municipal authorities responsible for electricity distribution and basic infrastructure for the bulk of urban electricity consumers. Though privatisation proposals for Eskom tabled by government in 1998 were subsequently abandoned, the utility was reformed to become a standalone private company, with a single shareholder in the state. This required Eskom to maintain financial independence, recovering its costs from users and financing new investments via the bond markets. At the same time however, its mandate has been broadened to comprise not only the broadening of electricity access among the poor, but an industrial policy objective to nurture ‘junior’ coal mining companies. This developmental remit has clashed with commercial pressures, with tariffs kept too low to fund new infrastructure investments and maintain an investment grade credit rating, but too high to increase ease of access for the poor. While the company has remained nominally public, it has been subject to the pressures of financialisation and is currently enduring a severe crisis. Meanwhile, cost recovery and social objectives have been frustrated by the dysfunctional intermediation of municipal authorities, who sell electricity on at a large mark-up, fail to collect user charges, and neglect distribution infrastructure. The paper raises issues of broader concern relating to models of public ownership and the limits of localisation and decentralisation in building a stronger foundational economy. Alongside an analysis of the evolution of energy policy over the past two decades, the paper presents time series data on Eskom finances, levels of access to and consumption of electricity by geographical region and industrial sector, and electricity costs and consumer tariffs.