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Unbundling Eskom – a silver or lead bullet?

The recent plan by the government of South Africa to unbundle the state electricity provider into three arms – Generation, Transmission and Distribution – has raised various questions. One of the more important question pertains to how the R400 billion debt will influence the unbundling. This article draws on international experiences as a way of preempting which outcomes (both negative and positive) the unbundling will result in, taking into account Eskom’s performance over time. While our analysis is not definitive, it does infer that in order to minimise the negative externalities, and maximise the positive gains from unbundling, there is need for government to have a well-considered action plan that balances the interests of the private and public sector.

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State capture and the transition to a green economy

State-owned corporations (SOCs), which have been particularly prone to state capture, have an important role in supporting the transition to a greener economy in South Africa. State capture can negatively impact this role, and the broader transition to a greener economy in South Africa, in several ways: State capture creates incentives for rent-seeking and corruption rather than innovation and entrepreneurship, limiting investment in the skills and capabilities required to drive transitions; it compounds existing structural rigidities and makes it more difficult for resources to migrate to where they are most useful during the transition to a low carbon economy; it reduces the capacity within public institutions to implement policies and initiatives that could support the transition. It also drains resources that could be used to support the transition; and it reduces the likelihood that the move to a green economy can reduce inequality.

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How much do state owned enterprises really cost us?

South Africa has opted to retain state control over a large number of companies which, in many other parts of the world, have been privatised. While state intervention can have an important role to play, for example in sectors where provision of services is important, but difficult to sustain on a commercial basis, there are often ways to achieve these objectives without resorting to state ownership of the organisation delivering the good or service. This obsession with state control has exacted a measurable cost to our economy.

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Bailouts of state owned enterprises and their impact on public finances

SAA has recently requested a capital injection of R 6 billion from the fiscus. Requests from SAA for recapitalisation (or bailouts) must by this point create a feeling of déjavu for most South Africans. In 2009/10, national government allocated R1.6 billion to SAA, and in 2007/08, R744 million was injected into SAA to allow the entity to restructure its operations and improve its debt to equity ratio.

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