Electricity transmission must be privatised

Martin van Staden / Midjourney
Martin van Staden / Midjourney

This article was first published by Business Day on 11 December 2024

South Africa has been spared from loadshedding, for now, due to reforms at Eskom that made its functioning less political and freed it from racially motivated procurement rules. The increased participation of private sector companies producing electricity has also helped. But we aren’t out of the woods yet.

Private power producers have become so effective at generating electricity that, in August, Eskom requested that they limit electricity supply to the national grid, losing the private companies revenue as a result. This is due to the electricity grid not being able to absorb the sheer amount of new generative capacity.

Peter Attard Monsalto, Managing Director of Krutham, has argued that South Africa needs 2500km of new transmission lines annually, but Eskom can only accomplish building around 300km a year. He argues that the private sector needs to get involved to make this possible.

If transmission infrastructure cannot keep up with electricity demand, and the growing supply of electricity, our economy will continue to stagnate. We need access to plentiful electricity to re-industrialise and to grow our flagging economy. While the National Transmission Company South Africa (NTCSA) has done a better job than in the past to grow our transmission infrastructure, it’s not good enough.

There needs to be a concerted effort to allow private sector participation in not just building transmission infrastructure, but in managing the grid.

As it stands, the NTCSA and Eskom are wracked with debt, and the constant threat that ideologues in government will once again push damaging policies on the parastatal and continue to use the state-owned enterprise as a source of corrupt revenue.

The more infrastructure and important utilities we can bring out from under the thumb of the state, the better for the economy. Not only does this need to happen to avoid future threats of political meddling, the private sector, when utilised properly almost always outperforms the public sector. But for this to be possible, future private sector transmission companies need to be decentralised and in competition with one another.

This can be through completely transparent and reasonable tendering processes where the cheapest and most effective company is chosen to build infrastructure in a particular area. Rather than petty political brownie points like BEE compliance, this tendering process must prioritise good fundamentals. What matters is delivering a good service to the people of South Africa at the lowest possible cost to the taxpayer.

Managing the grid and distribution of electricity must also be taken over by the private sector. This is to solve the problem of non-paying customers.

Eskom believes that it loses R2 billion in revenue monthly to electricity thieves. Not much is done to address these non-payers, as doing so could jeopardise votes. No municipality wants to enforce electricity payment when doing so could threaten their power.

Profit-making companies, on the other hand, don’t care about votes. They care about payment. And they will enforce payment, or shutdown the power, if necessary to force compliance. This will lead to a drop in non-payment and electricity theft and mean more money for the electricity industry to drive down prices, invest more in generation and transmission, and keep the entire industry afloat.

Eskom has come a long way since last year. But more can be done, and more must be done so we can avoid future loadshedding and uplift our economy. The private sector has proven to have a positive role in addressing the generation shortfall. Now, let it help solve transmission and distribution problems. South Africa can only benefit as a result.

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The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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