Privatising Eskom: For the people, not the connected few

Zakhele Mthembu of the Free Market Foundation explores the potential benefits and pitfalls of privatising Eskom. While privatisation is being considered as a solution to Eskom’s financial and operational problems, Mthembu argues that it should not be used as a means of entrenching patronage networks and benefiting only a select few. This article proposes a model of privatisation that would centre ordinary people as shareholders in the company.

People Centred Privatisation

By Zakhele Mthembu*

Eskom is in dire straits financially and operationally, and calls for its privatisation are increasing. Privatisation is welcomed but it should not be another avenue to entrench patronage networks and benefit a few connected individuals.

Eskom was created using South African tax money. It is, by definition, a public asset, belonging to the South African state, which in reality is the South African people. When it was first created it did not benefit a large majority of South Africans whose taxes helped to fund it. After the first democratic elections in 1994, electrification was finally afforded the indigenous population of South Africa. Now as privatisation draws near, benefit should accrue to everyone, not a select few.

Privatisation can be described as the process of changing ownership of a particular enterprise from the state, to private hands. It is the process which created the world-famous oligarchs in Russia, who bought up former Soviet companies.The money was pocketed by the Russian State, with a large majority of Russian people not seeing anything material from their public assets being sold.

The conversion of ownership from the state to private hands is opposed by those who would cite instances like the Russian one or any other, for there are multiple examples, as a reason for their opposition. Although the state is logically barred from creating wealth since its ‘capital’ is other people’s already created wealth, this does not mean that privatisation should be supported even when it could perpetuate state patronage networks.

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In South Africa, there has been the partial privatisation of Telkom as an example to use. Although partially privatised over a decade ago, the average South African would not know nor care. Yet this was their company, they had stock in that company, even if it was 1 in 60 million, they still owned it and yet when it was privatised, the money went to the state and was probably used in some ‘irregular expenditure’ by a government department somewhere.

Using the example of Telkom, how is the average South African supposed to trust that privatisation is in their interest? Privatisation as is being spoken of in opposition parties, and even when spoken of in the state, is centred around those who are connected to political elites and big businesses. The man on the street, although having an equal share to Eskom as the president does individually, is not even thought of.

Privatisation can take a different form though. It can empower the common people with a sense of ownership over their enterprises. In a paper titled Desocialization of Enterprises: Empowering Venezuelans, authored by Rafael Acevedo. Luis B. Cirocco and Lorca-Susino Maria, the case for privatisation that will centre people is made.

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In the version of possible privatisation for Venezuela advanced in the paper, the political elites are far removed from the process. Banks in which citizens have accounts act as proxies for private citizens proportionately to the share of bank accounts they have in the country. In their proposal, every Venezuelan above 18 years of age with a bank account will get a share of the company that is to be desocialised/privatised, with the freedom to do with that equity as you deem fit after receiving it.

This type of privatisation is an example to show that the phenomena need not take a single path, one that was already taken in South African in the past with Telkom. Privatisation can benefit the ordinary man by making him an actual part owner in a company that is central to his life like Eskom is. Instead of the problematic elite-centred privatisation model which sees friends of politicians seemingly getting public assets on the cheap, with the proceeds of the sale never truly having a real impact on ordinary people’s lives.

Eskom’s privatisation can – and I argue that it should – take a different path. It need not benefit the connected elites who were fortunate enough to buy a table close to the president at one of the ANC’s fundraisers. The state as a representation of the people should be the beneficiary of any sale of its assets. Not the administrators of the state, but those whom it is premised upon. If this is not the case, then privatisation is cover that has the end of villainising the private sector, for normal state patronage.

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The equity of Eskom could be divided among South Africa’s adult population, tied to ID numbers with certificates for equity being collected at Post Offices or bank accounts which belong to South Africans, and these certificates being collected at bank branches. Eskom workers would also be given equity in the business in their capacity as citizens.

A different model than the one advanced in the mentioned paper could be followed. The manner in which it happens is inconsequential, as long that form of privatisation will put the actual individuals who make up the South African public at the centre. The privatisation of public assets should benefit the public and not a connected few.

As opposition parties are entertaining the idea of desocialisation, the manner it takes must be discussed so that the consciousness of free markets and free enterprise is fostered, instead of anything private being associated with the same corruption as the state.

*Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation. The views expressed in the article are the author’s and not necessarily shared by the members of the Foundation or BizNews.