Recent power cuts & announcement that Eskom will be receiving R23-billion a year are symptomatic of operational and financial crises at the utility.
These claims are dubious. For instance, the claim about private sector financing rests on the assumption that private investors will get a guarantee of future tariffs or revenues. But a guarantee would also facilitate Eskom borrowing from financial markets itself. And the obstacle to such a provision is partly regulatory and partly that it would create a large contingent liability for the state.
A great deal has been written about the restructuring of state-owned enterprises. There have been both successes and failures. International experience across many industries shows that while separation can have a positive effect, it can also lead to breakdown of communication and information flows, distortion of incentives relative to the public interest, decline in operational indicators and excessive profits for private participants..
Decentralised renewable power generation by firms and households is rarely entirely “off grid”. When the sun doesn’t shine, electricity is drawn from the grid. But revenues from the sale of this electricity aren’t enough to fund the costs of the underlying generation and transmission infrastructure. There are other reasons to gradually expand South Africa’s renewable energy capacity. That is certainly. But obscuring its downsides will lead to dangerously inaccurate beliefs about what is actually a very limited role for renewables in addressing the current crisis.
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