The Free Market Foundation has proposed a simple change to the Electricity Regulation Act it says would be a game changer in solving the electricity shortage in South Africa.
The organisation said the electricity crisis is due to Eskom being the sole buyer and seller of electricity in South Africa.
This monopoly, which is unable to serve the country’s energy needs, is causing tremendous damage to the economy.
“Eskom’s monopoly must be broken, and the private sector should be empowered to provide electricity,” the FMF said.
For this to happen, the government should amend the Electricity Regulation Act to create a competitive energy market in South Africa.
The Electricity Regulation Act of 2006’s Chapter III on Electricity Licences and Registration states:
No person may, without a license issued by the Regulator in accordance with this Act-
(a) operate any generation, transmission or distribution facility;
(b) import or export any electricity; or
(c) be involved in trading.
The Free Market Foundation (FMF) argues that South Africa’s electricity challenges are due to two words in the Act – no person.
Changing “no person” to “every person”, the FMF said, will open the supply of energy in South Africa and solve its energy crisis.
“The government should allow every person or business capable and willing to participate in power generation,” it said.
Eskom cannot be saved
The Free Market Foundation’s view is substantiated by top economists, like Efficient Group’s Dawie Roodt, who also believes the private sector is the only hope to solve the crisis.
Roodt said Eskom is financially and operationally unsalvageable and will come to the same end as South African Airways (SAA).
He said that to see how the “Eskom movie will play out,” you merely have to look at what happened to another state-owned enterprise — SAA.
“SAA had ten turnaround plans, and they all failed. The company was ultimately run into the ground financially and operationally,” he said. “Eskom will go the same way.”
“Eskom has been run into the ground, and the only way to get reliable electricity is for the private sector to provide it,” he said.
This article was first published by Daily Investor and is republished with permission.