Change politics; solve Eskom’s problems

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Common to most answers is that state ownership – nationalisation – is the problem and that privatisation is the solution. Pierre Heistein’s article, “Privatisation of Eskom units may be sole solution” (Business Report, August 7), reflects this prevailing view.

Heistein’s concern is how to finance Eskom’s already committed expenditure of R225 billion. Unfortunately, he artificially narrows the options by summarily ruling out taxation as a possible solution. Whether by intent or not, this conveniently opens the door to private capital, which he sees as our saviour.

For present purposes it must suffice to say that, apart from large-scale transfer pricing and other forms of tax evasion and avoidance, our supposedly progressive tax system has little connection with the enormous concentration of wealth at the top of the income pyramid reflecting South Africa’s world-beating inequality. And tax is but one way of tapping into the wealth available for the public good.

Stopping illicit capital flows and addressing the reality of a regressive tax system are more than just some of the long-term solutions: they warn against any rush to a private sector embrace.

Given that the private sector could additionally be held responsible for the global crisis that is still creating havoc six years after its inception in 2008, we should be careful before throwing out the nationalisation baby with the Eskom-dirtied bath water.

A simple reminder is a good place to begin this cautionary exercise: until the blackouts of 2008, Eskom, far from being a problem, was instead a striking success producing among the cheapest electricity in the world.

Eskom’s electricity was so cheap precisely because, being nationalised, it was not driven by the imperative of maximising profit but could instead prioritise cheap electricity as a government subsidy to the economy.

It bears further reminding that many nationalised industries and services began as private enterprises that were subsequently nationalised because they were too small, insufficiently capitalised or too destructively competitive to meet either the needs of the economy or society as a whole. Britain, for instance, nationalised water delivery in the 19th century in the interest of public health because the rich were exposed to contaminated water along with the poor.

This broader societal perspective brings us to the idea that nationalisation is part of a “mixed economy”; an economy of two disparate realms, the public and private, which somehow co-exist despite their inherent differences.

Nationalisation supposedly stands in opposition to a “pure” capitalism based on private ownership and the imperative of profit maximisation; hence the idea of the “mixed” economy.

Conflict between the public and private is real from the perspective of individual capitalists; the public sector does restrict or complicate individual profit maximising. Governments, however, have to give priority to the interests of the collective capitalists and the society shaped around those interests.

For governments acting in this broader economic and social context, acting, that is, in the public interest, there is only one economy: a capitalist economy that needs state support.

Nationalisation plays this essential supporting role, a role that by design complements capitalism and its social structures rather than challenging them in any substantive or sustained manner.

This is clearly seen when capital actually invites the state to fill the required spaces that are not sufficiently profitable for the private sector. One of South Africa’s leading bankers, Investec chief executive Stephen Koseff, recently called on the government “to look after things the private sector doesn’t want to touch because it is not economically viable”.

The public sector’s complementary role to capital is dramatically illustrated when, like recently, the state intervenes to save capitalism by nationalising some of its industries, banks or corporations, then handing them back to their private owners once the immediate crisis is over and after turning private debts into colossal public ones.

In South Africa, the main state-owned enterprises have all been corporatised. Their main difference from private companies is that their officially described “shareholder” is the state. Like private companies, they are expected to be financially self-sufficient and to make a profit. As has been said of nominally nationalised Rand Water, “public is as private does”.

It is this internalisation of what “private does” that allows for the seamless absorption by top private corporations of top public officials

In sharp contrast to capitalist nationalisation, there is socialist nationalisation. This is social ownership and control of industries or enterprises in an already established or transitional society in which the overarching imperative is not profit maximisation.

For present purposes, it is necessary only to recognise the fundamental differences between nationalisation under capitalism and the form it could take under a still-to-be realised socialism.

Eskom is not only a nationalised entity under capitalism but under neo-liberal capitalism. Reverting to its pre-neoliberal days would be a big step forward. Moreover, re-prioritising its public interest mandate, a mandate made all the more urgent by climate change and the need for a low-carbon economy, would be another immediate step. Both these steps require a radically new politics.

This new politics would also address government policy incoherence that on a grand scale bedevils Eskom.

Examples include:

- The government’s insistence that part of Eskom should be privatised delayed the building of extra capacity and caused Eskom’s current inability to meet demand;

- Eskom is mandated to be cost effective while simultaneously promoting black economic empowerment regardless of cost;

- Despite its commitment to a low carbon economy, the government has allowed Eskom to build two of the world’s largest coal-powered stations; and

- Eskom’s management is required to be of the very highest calibre while simultaneously meeting the mechanistic demands and compounding abuses of affirmative action.

Notwithstanding the government’s promotion of energy efficiency, the Treasury will penalise Eskom financially should energy efficiency savings result in the demand for electricity being less than Eskom’s predictions.

Climate change compounds the mixed messages. Far from promoting renewable energy as both an alternative to carbon-coughing coal and as an additional supply of energy, Eskom is predisposed to obstructing anything that threatens the demand for its electricity.

The ultimate absurdity is that, while Eskom is expected to provide the cheapest electricity for the economy and domestic use, it has also to pay off its enormous debts. This results in Eskom having to increase its price for electricity as it simultaneously reduces its costs.

Privatisation is welcomed by the few who would profit enormously at public expense. Capitalist nationalisation, however, is, in itself, not the cause of Eskom’s problems. The problems are political that only a government with different politics and coherent policies can address.

- A longer version of this article first appeared in the Daily Maverick, May 25, 2014)

* Dr Jeff Rudin is a research associate at the Alternative Information & Development Centre.


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