Daily Maverick columnist calls for review of funding for South African state-owned enterprises
In South Africa, a columnist for Daily Maverick called for a radical review of the approach to financing state-owned utility companies. In his view, supporting loss-making monopolies through the budget and state guarantees shifts the burden onto taxpayers and conceals the scale of cross-subsidization.
Criticism of tariff increases
As an example, the author cited the state energy company Eskom. He considers an 8.8% increase in electricity tariffs unacceptable amid inflation of 4.3%, population growth of 1.1%, economic growth of less than 1%, and unemployment at 33.6%.
The column states that high electricity costs may affect the profitability of energy-intensive industrial enterprises, including smelting operations that supply products for export. Such furnaces require significant volumes of energy to operate, and electricity is one of the important components of production costs.
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Partnership with industry
The author proposes that Eskom agree with major industrial consumers on a tariff level at which enterprises can operate without losses. Under this model, profitable exporters would pay taxes to the state budget, provide foreign currency revenues, and could attract foreign direct investment.
In the author's view, predictable positive cash flows could help attract capital at a lower cost and reduce the need for state funding or National Treasury guarantees. He also proposes developing long-term product purchase agreements that could support export competitiveness through lower resource costs.
The author emphasizes that this approach is not privatization. He calls on authorities at the municipal, provincial, and national levels to move from centralized allocation of funds to more detailed economic modeling and targeted capital allocation.
