This is most importantly seen in the legislation that established Escom and the annual reports in the 1980s and 1990s that suggest how Escom/Eskom tried to address its position and may have dug itself into a deeper hole. The electrification exceeded expectations. But was Escom a model angel institution that fell and became Eskom? The most substantial point of this paper was stating a need for competition in energy markets and the need to remove market distortions and introduce realistic pricing. The victim of this relationship was the VFPC, who was put under the control of Escom, even if indirectly. Both Southall and Kenny agree, however, that a departure from meritocracy caused the downfall of Eskom. What has not been are the actions of Escom/Eskom under the lens of economic theory. Unfortunately, the White Paper didn’t make it into law. The Austrian School of Economics hails back to 1871, when Carl Menger founded the school with the publication of the Principles of Economics.  Its role as a prime regulator, with the power vested in it by the Electricity Act of 1922, gave it power over the industry. Austrian economics provides a theoretical framework from which to examine Escom/Eskom. Sakhela Buhlungu, John Daniel, Roger Southall & Jessica Lutchman (Cape Town: HSRC Press, 2007), 203. Rather, it should have acted like a monopoly.  Despite this, prices continued to be lowered. Without competition, an entity can retain control over an industry and direct it along their whims – raising prices to exorbitant levels or conducting business with inferior competence due to little to no incentive to perform admirably.  Escom, Annual report, Johannesburg: Eskom, 1993, , 10. A brief primer on the methodology of the school will be provided in the subsequent section.  Southall, “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” 203. Ces derniers sont susceptibles de déposer des cookies sur votre ordinateur selon les règles de gestion qu'ils ont définies et que nous vous invitons à consulter sur leur site. Edited by David MacDonald, 50-69. The problem was that Escom was charging under the amount that it needed to, leading to inflated demand and unsustainable production. Ces cookies ne sont déposés que si vous donnez votre accord. It is no wonder this system fell apart! The answer isn’t increased government control over electricity, but vast liberalisation of the industry. Auckland: Institute for Liberal Values, 2003.  The initial investigation found that Escom had been performing adequately up till the mid-70s. Student accommodation and catering services as well as sport facilities are available on the campus. It was ordered by decree and not by market demand.  Commission of Inquiry into the Supply of Electricity in the Republic of South Africa, Report of the Commission of Inquiry into the Supply of Electricity in the Republic of South Africa, 3.  Frédéric Bastiat, “That which is seen and that which is not seen,” in The Liberal Tide: From Tyranny to Liberty, ed. Corruption and mismanagement is a given, but how did it come to pass? Commission of Inquiry into the Supply of Electricity in the Republic of South Africa.  The 70s saw much of this come to the fore, when Apartheid’s strangled economy and Escom’s surplus saw three coal stations being mothballed.  One can argue that it was too rapid, as the 1994 report states that non-paying customers are a huge threat to Eskom’s financial stability. Clark, Nancy. Leonard Gentle (2008) argues that electrification was shaped by a ‘mineral-energy complex’ (MEC). To learn more about student life in Compiègne, see the links Vie sur le campus and Se déplacer dans Compiègne, Gestion de vos préférences sur les cookies. Pietermaritzburg Economic Justice and Dignity stated that the increased tariffs will exacerbate urban poverty negating increases to South Africa's basic income grant.  Southall, “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” 215. Accueil International Welcome at ESCOM Chimie. As a point of contention, there is little to no argument over the role of the MEC in Escom’s foundation. local buses and an ideal environment for students to live and study in good conditions. Competitors may not have been interested in entering the market in the 90s, but now that prices are normalised, South Africa is ripe for a free market in electricity.  In the 1989 annual report, the Chairman also stressed that their production capacity was satisfactory and that new plants would only need to be built in 2000. Government Gazette. This argument falls for a common fallacy that Frédéric Bastiat addressed in 1850.  It is crucial to keep this in mind while examining Escom. Conserving electricity without raising prices is economically unsound. Clark (2008) and Southall (2007) provide more interesting insight into the foundation of Escom, through an analysis of the ideologies influencing the founding. The alternative to a free market is a planned economy, or heavily intervened one, where prices are distorted. Electrification around mines makes market sense. Allow for a sounder income structure that enables profit. While it may have been founded as a means to generate cheap electricity for mining, as a power utility, it had an obligation to maintain power to the country at large. But if they had been used to the prices from day one, then there wouldn’t have been a shock.  Prices expose the state of the supply and demand of a product, allowing agents to understand its scarcity or abundance, as well as the demand of other people. Temba A. Nolutshungu (Johannesburg: Free Market Foundation, 2011), 99. In 1923, the Electric Supply Commission (Escom) was founded humbly as an electricity regulator and subsidiary supplier – this is if a monopoly state entity can be considered humble at all. Annual report. As is seen in the Escom annual reports, this is achieved by cutting costs. As said earlier, Eskom was blind. Urbach, Jasson. 5 (1993): 623-639. Without competition, Escom/Eskom lacked the proper price mechanism to determine a prudent cost of electricity. As we can see in contemporary South Africa, our economy could not handle the shock of raised electricity prices. In line with the De Villiers Commission and internal Escom decision-making, the enterprise wanted to transition into a business.  Clark provided, among a broad and insightful analysis of Escom up till 1994, an argument that Escom was founded in a confused state of wanting to be capitalist, but being dominated by statist policies.  Escom was not permitted to receive direct public funding, but was also not allowed to charge a market-rate for electricity, creating a dire combination.  Steyn maintains that the commission had an ulterior motive of ousting the incumbent Escom leadership, but nothing in the primary case material backs up that assertion. Marketing is a blatant waste of money. As such, when examining Eskom today, we shouldn’t try to address its problems by reducing prices once again. Its pretense at playing private sector is costing it dearly, as it refuses to take advantage of its status. “That which is seen and that which is not seen.” In The Liberal Tide: From Tyranny to Liberty, edited by Jim Peron, 59-80. Eskom. Without the ability to change its prices to meet the market, Escom was toothless. This is due to the differing incentives of public institutions and the inability to utilise price signals in a non-free market. , In 1995, Eskom recorded great successes in reaching RDP goals. Rapid electrification did happen during this period, as well. When the private sector does a good job, it profits. Hopefully, this paper will provide a decent departure from the orthodoxy and reveal the uneconomic nature inherent in Escom/Eskom, rather than just its face-value political activities and importance. Businesses are effective because they are forged in the fires of free market competition and because market mechanisms force them to subscribe to appropriate pricing and actions.
2020 economic engineering escom