Give Us Facts, Not Rhetoric

GIVE US FACTS, NOT RHETORIC

By Reg Rumney, Mail & Guardian, 18 October 2002

PLEASE NOTE: Readers wanting to reproduce and reference this article should contact Mail & Guardian

Privatisation in South Africa is more complex than is often made out analysis

David McDonald's article ("Out of touch with workers", October 11) supposedly backing the Congress of South African Trade Union (Cosatu) anti-privatisation strike is typical of the obfuscation around this important issue, not helped by the government's inability to sell its own programme.

McDonald rounds up the usual suspects: the World Bank, the World Trade Organisation, big business, and multinationals, without casting much light on the issue. In this his article was typical of the recent contentless debate over privatisation, in which where you stand on the issue matters more than fact.

How can McDonald talk about an "aggressive privatisation agenda" in a country where, firstly, there was never that much to privatise and, secondly, not much has been privatised? South Africa has never had a nationalised banking or mining sector, for example. Parastatals, including the big state financial institutions such as the Development Bank of Southern Africa and the Industrial Development Corporation, contribute only 7% to the economy, according to the Department of Public Enterprises.

Since 1994 the only significant actual privatisations have been of 33% of telecoms utility Telkom, 20% of the Airports Company and 20% of South African Airways. Of the R27-billion raised through "privatisation", two big chunks came from what few would regard as privatisation at all. The transfer of excess assets from state riot insurer Sasria (ironically what some have called "nationalisation") made up 29%, and Transnet's monetisation of M-Cell shares contributed another 36%. Only the sale of around a third of Telkom was significant, making up 23% or a little more than R6-billion of the total.

Selling off 30% of Eskom, as is planned, may bring in more in one go than all the privatisation to date, around R30-billion.

Privatisation as most people think of it should not be confused with so-called private-public sector partnerships (PPP). Even here at the municipal level the municipal infra- structure investment unit has only handled about R7-billion worth of transactions, and only around R5-billion of those are the sometimes problematic concessions or management contracts.

At the level of delivery of things such as water and electricity people are rightly concerned that changing the structure will change the price they pay, or affect the poor. Most ordinary people are probably less concerned about ownership issues than price and service.

Little evidence exists that ordinary people feel particularly perturbed about long-time telecommunications monopolist Telkom's privatisation per se. Middle-class users who resent monopolies probably welcome the effects of competition. It is pleasant not to have to wait six months for a line, as privileged white people did back in the 1970s and 1980s.

Access to a phone is important, and great strides have been made. The agreed "roll-out" of lines that were never going to be affordable and most of which have since been cut off for non-payment was always a sop to critics who felt that guaranteeing the strategic equity partner a five-year monopoly -- to maximize proceeds of the initial 30% sale -- was grossly unfair. Though it has spent R48-billion on its infrastructure in the past five years, Telkom has disconnected most of the new lines installed. Yet while Telkom reported at the end of March this year that only 667 039 of the 2,67-million lines delivered during its five-year monopoly were still in service, that is still almost 700 000 lines more than before, and the decline may also have something to do with the shift to cellphones.

That Telkom has failed dismally in extending lines to the masses is an indictment of a flawed process: the United Kingdom experience shows a monopoly should never be privatised. More important is liberalisation, where the advent of competition to Telkom, though late in the day, is an important step. A more competitive market would almost certainly have limited the increase in call costs.

Liberalisation will also be important in future electricity supply. For about 15 years Eskom has been able to use the massive over-investment of the 1970s, its own efficiency, and cheap, low-quality coal to keep electricity prices low, giving South Africa a competitive advantage and winning the hearts and minds of the public. Eskom may not forever be a model of efficiency. I remember when it was a hissing and a byword for the opposite reason. Discontented customers at one stage dubbed the now almost empty Megawatt Park the hanging gardens of Babylon.

BusinessMap's own extensive research shows that electricity prices will rise in any event from 2007, even if Eskom is left exactly as it is. Yet prices will rise at a lower rate without privatisation. The government wants to privatise part of Eskom -- and create limited competition -- to foster black economic empowerment, raise money for the fiscus, broaden the tax base and entice foreign investment. All these will outweigh the slightly higher rate of increase.

Moreover, Eskom is moving aggressively into other parts of Africa. It would be highly hypocritical, not to mention politically unpalatable, for South Africa to take advantage of privatisation and liberalisation elsewhere in Africa and maintain a completely protected market at home.

At local government level municipalities can enter into partnerships with firms to provide services. It is here that most of the heat is generated, particularly about water. Water is life. Privatising holds real dangers, especially where it is relatively scarce. And this is why the government, with Kader Asmal as Minister of Water Affairs and Forestry, moved to "nationalise", in a sense, ownership of this scarce resource -- not privatise it. Putting in and maintaining the pipes, and so on, and paying for them is a different issue.

At the municipal level a range of mechanisms for delivery exists. These include "public-public" partnerships, where, for instance, parastatal Rand Water takes over the job of delivering water in Harrismith.

That such partnerships are not subjected to the white heat of often adversarial scrutiny is a mark of the politicisation of PPPs at the municipal level, particularly water. "Privatisation" of municipal services is the new red flag for the anti-globalisation movement (not to mention red rag to a bull).

PPPs at the municipal level are causes for concern because of the need for municipalities to monitor pricing and delivery. It is hard to see how municipalities are going to be able to deliver services to the poor without tapping the resources of the private sector. And while caution must be the watchword here, this is not an excuse for inaction.

The National Treasury has a specialised unit charged with overseeing PPPs at the national and provincial level to ensure the private sector carries sufficient risk to make these true partnerships, not merely another onerous form of procurement.

So privatisation in South Africa is much more complex than is often made out. And perhaps if the public knew exactly what was involved they might be able to make informed decisions.

Government may be guilty of not communicating its intentions, it may even be guilty of not understanding what Cosatu means by consultation, but it is not guilty of steaming ahead. And yes, debate is needed about what to privatise and what not. In the UK private-sector involvement in education has come under fire, and privatisation of rail transport has provided the world with a good example of when it is better not to privatise rather than do it in the wrong way.

A few facts would be helpful, rather than tired, rabble-rousing rhetoric about the World Bank and the World Trade Organisation.

It is not who is right that is crucial in this debate, but what is right.

Reg Rumney is information services director at the BusinessMap Foundation