The ANC, it won’t surprise you to learn, is a party of often deeply silly ideas. It is the gold standard — the R22m towering flagpole of hare-brained schemes.
But say what you like about the ANC, it knows how to double down on failure.
What does the governing party do, for example, when 85% of public clinics and hospitals don’t meet basic health-care standards, and its spending on provincial health care is “inefficient” to the tune of R17bn? The answer: ignore that hot mess, and start another government-run system — National Health Insurance (NHI) — rather than fix the first.
Last week, ANC chair (and minister of mineral resources & energy) Gwede Mantashe said: “Let’s have a second generation company of the state, and that generation company must focus on baseload, and there must be a build programme for power stations.”
In other words, another Eskom.
Given Mantashe’s predilection for staunch statist control, this isn’t surprising.
But the real issue is that his boss, President Cyril Ramaphosa, doesn’t think it’s an awful plan.
Addressing the SACP, Ramaphosa spoke of the “great risk” of letting one company generate all the electricity.
He said Mantashe’s proposal was a “great idea” as China has “a number of state-owned electricity-generating companies that compete among themselves”. This, he said, “is a future that we should begin to imagine”.
Oh, we don’t have to imagine it; we’ve seen how this plays out — with tenders being hugely inflated to pay off cadres, a procurement bureaucracy happy to pay R26 for a roll of single-ply toilet paper, and a bloated workforce holding the country to ransom for above-inflation wage hikes.
We can’t run away from fixing Eskom by establishing yet another state entity — we have 700 already
— Isaah Mhlanga
As one analyst puts it: “We can’t run away from fixing Eskom by establishing yet another state-owned entity — we have 700 already.”
Another who thinks it’s a terrible idea, on the face of it, is Isaah Mhlanga, Alexforbes’ chief economist.
“If such a new utility was to be run under a different leadership, with less political influence, then maybe,” he tells the FM. “The problem that the new entity is trying to solve hasn’t been clearly identified or explained to the public either. If it is the lack of skills at Eskom, where will the skills come from?” he says.
Ramaphosa’s comparison to China is also misleading, as that country is particularly harsh on any instance of corruption — yet SA’s government is far more equivocal about cracking down on the scourge.
For political analyst Ralph Mathekga, these bonkers ideas are symptomatic of a deeper problem: that the ANC, clinging to the centrist state, can’t bear to give up control of SA’s energy spend — a future implied in the push for renewable energy, and the looming breakup of Eskom.
“There are vested interests we haven’t acknowledged,” he tells the FM. “The ANC is seeing its ability to ensure the survival of its patronage system, and drive the transformation agenda, slip away. There is intense anxiety about what happens if it loses control of energy too.”
Mathekga says it doesn’t matter to the party that it doesn’t have the skills to run even one energy company.
“If you ask them why they want this, they’ll say ‘to drive transformation’. But it’s precisely this transformation experiment that resulted in the mess at Eskom. And the costs have now been externalised into society, through load-shedding,” he says.
Prof Anton Eberhard, an energy expert at the University of Cape Town, says the notion that the state should be involved in the power sector isn’t entirely without merit.
“You could even conceive of Eskom breaking up its power generation business into three or four companies that compete. But if the minister meant we need to set up Eskom 2.0, which would invest in new coal companies and replicate what is already there, I don’t see the advantage,” he says.
Nor is it necessary. The private sector has shown it is keen to invest, through the thriving renewable energy programme. Once Eskom is split into three — generation, transmission and distribution — private firms could win concessions to distribute power too.
Says Eberhard: “The big question would be, how would the state create Eskom 2.0? Where would the capital come from, how would it fund its equity, and where would the skills, capabilities and experience come from?”
State ownership, he says, would only create an incentive structure that is less powerful than private generation companies, which deploy capital more efficiently, and produce lower-cost electricity.
Ideally, Mathekga says the ANC would be punished at the voting booth for its daft plans. But this hasn’t happened as it should.
“The middle class, which understands these economic dynamics, dominates the political discourse but not the political movements. The poor, who don’t understand these dynamics, dominate the political movements, but not the discourse. And the ANC has arbitraged this to avoid accountability,” he says.
Mathekga cites the basic income grant: for the poor, the grant shows the state cares; for the middle class, it’s the state paying up for its failure to create jobs. “The net effect for both the rich and the poor is the same — the economy becomes weaker, but the state muddles through.”
Mantashe’s proposal also ignores how steeply trust in public procurement has plunged. Chief justice Raymond Zondo’s state capture report sketches a picture of a government unable to tie its laces without asking for a kickback from the toecap.
Mathekga says even without shenanigans, “so many bad habits and price distortions have crept in that no-one has any idea what your tax money buys any more”.
This is why, he reckons, Eskom 2.0 won’t happen. It’ll end up, like NHI, as a notional threat of wastage hanging over SA for years, going nowhere slowly.
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