ANC privatising Eskom and Transnet by accident

The African National Congress (ANC) has inadvertently been privatising Eskom, Transnet, and other state-owned enterprises (SOEs) over the past decade. 

Its mismanagement of these companies has resulted in them being unable to provide basic services to their customers, forcing them to use private-sector alternatives. 

As more and more of their customers use alternatives, they risk disappearing as the Post Office has from the daily lives of South Africans. 

Efficient Group chief economist Dawie Roodt recently explained how this process has unfolded, with South Africa set to benefit from more private-sector participation in the economy. 

Roodt told State of the Nation that the privatisation of SOEs is not a result of deliberate actions from the ANC to boost private investment and grow the economy. 

“The ideology of the ANC is to centralise power and control over the economy. They want to lead a developmental state that intervenes in the economy,” Roodt explained. 

“They call each other comrades and shout about their socialist principles. They want to control the commanding heights of the economy.” 

This ideology led the ANC to ensure the state retains control over key SOEs, such as Eskom and Transnet, and prevents private participation in these sectors. 

The party’s policy while in government over the past three decades has been for the state to play a leading role in driving economic growth. 

SOEs and public companies are seen as key to this, as many are monopolies on key sectors of the economy, such as electricity and logistics. 

The ANC sought to drive the direction of the economy through these companies, impose its transformation agenda, and dictate how business is done in the country. 

Ultimately, this gave the government significant control over the economy, with it controlling several key “network sectors” that are universal inputs into any business. 

The government had full control over electricity, logistics, and many other areas of the economy through these SOEs. 

However, with this control and influence came significant responsibilities that the government has proven unable to bear. 

The privatisation of Eskom and Transnet

Roodt explained that the ANC never accounted for incompetence and mismanagement at these SOEs, which has led to South Africans having to turn to private-sector alternatives. 

The ANC’s mismanagement of these companies has effectively rendered them useless, and, for the proper functioning of the economy, alternatives have been created. 

“Because they are so destructive, incompetent, and often corrupt, things started falling apart. The more the ANC centralised things, the worse they got,” Roodt explained. 

“The ANC’s centralisation of power resulted in things breaking and becoming more fragmented. Eskom is a very good example of that.” 

Eskom’s monopoly has been broken by its inability to provide reliable electricity to consumers, despite the ANC trying to centralise control since 1994. 

The inability to provide reliable electricity has resulted in households and businesses investing in alternative energy sources, such as rooftop solar and even utility-scale wind farms. 

This has resulted in Eskom facing private competition for the first time in its history, with the electricity sector no longer monopolised by it. 

Private players can produce their own electricity for their own operations without ever having to purchase power from Eskom. They can also wheel it through the grid to other companies, effectively replacing Eskom as the energy generator. 

“This is a good news story. The bad news is that these things had to be destroyed in the first place, which hurt the economy,” Roodt said. 

“The good news story is that the ANC is being forced to do the right thing by increasing private participation in the economy.” 

Transnet is slightly different in that a private player cannot build its own ports or railways in South Africa, so companies cannot directly compete with the utility. 

However, Transnet is increasingly allowing private companies to operate port terminals, railway corridors, and upgrade its infrastructure through concession deals. 

“Michelle Phillips is doing a great job there. She is getting private players to participate in running the ports and railways,” Roodt said. 

“They are still at rock bottom, but there are significant improvements, particularly at Durban, which is critical for the economy.” 

Roodt describes this process as a backdoor kind of privatisation. “The private sector is just taking over the role of these public companies,” he said. 

He pointed to the example of what happened with South African Airways and the Post Office, which collapsed and were replaced by private companies.