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From racial to class apartheid: South Africa's frustrating decade of freedom
Monthly Review, March, 2004 by Patrick Bond
Privatization Fails to Deliver
It is important to add that the government's canard of "insufficient state capacity" to solve social and environmental problems has been matched by a willingness to turn resources over to the private sector. If outsourcing, corporatization, and privatization can work anywhere in Africa, they should in South Africa--with its large, wealthy markets, relatively competent firms and advanced infrastructure. However, contrary evidence emerges from the four major cases of commodification of state services: telecommunications, transportation, electricity, and water.
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First, consider the mess created in the lucrative telecommunications sector, in which 30 percent of state-owned Telkom was sold to a Houston-Kuala Lumpur alliance. The cost of local calls skyrocketed, leading the vast majority of new lines to be disconnected. Meanwhile, 20,000 workers were fired. Attempts by the government to cap fixed-line monopoly pricing were blocked by the Texas-Malaysia joint venture with a court challenge and a serious threat to sell their Telkom shares in 2002. As a result, Telkom's 2003 initial public offering on the New York Stock Exchange raised only a disappointing $500 million. Thus, in the process an estimated $5 billion of Pretoria's own funding of Telkom's late 1990s capital expansion evaporated. A pact on pricing and services between the two main private cellular operators and persistent allegations of corruption combined to stymie the introduction of new cellular and fixed-line operators.
Second, in the field of transportation there have been a variety of dilemmas associated with partial privatizations. Commercialized toll roads are unaffordable for the poor. Air transport privatization led to the collapse of the first regional state-owned airline. South African Airways has been disastrously mismanaged, with huge currency-trading losses and an inexplicable $20 million payout to a short-lived U.S. manager. The privatization of the Airports Company has led to security lapses and labor conflict. Constant strife with the ANC-aligned trade union has thrown port privatization into question. The increasingly corporatized rail service shut down many feeder routes that, although unprofitable, were crucial to rural economies.
Third, the electricity sector is privatizing rapidly, with 30 percent of the parastatal Eskom (the world's fourth largest electricity producer) to be sold in 2004, resulting in a host of problems. Thirty thousand electricity workers lost their jobs during the 1990s. Potentially unnecessary new generation capacity is being created by private suppliers. While a tiny pittance is invested in renewable energy, the state is likely to expand nuclear energy, through new pebble bed reactors in partnership with U.S. and British firms. Rates for residential customers have risen much higher as cross-subsidies came under attack during the late 1990s. As a result of increasingly unaffordable rates, Eskom slowed the extension of the rural electricity grid, while millions of people who fell into arrears on inflated bills have been disconnected--leading to massive (often successful) resistance such as illegal reconnections. With tuberculosis and other respiratory illnesses reaching epidemic levels it is a cause for concern that those who do not reconnect their electricity are forced back to paraffin or coal fires for cooking, with all the hazards that entails.
