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After the elections: Being state-owned isn’t a problem, so long as an enterprise is run well. Will the infrastructure collapse lead to privatizations?

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By Lawrence Hamilton

To help save the planet, governments across the globe are choosing to adopt sustainable policies and encourage (or coerce) the private sector to do likewise. Given the climate crisis, most responsible governments are focusing on finding every possible means to meet existing needs without sacrificing the planet to meet the needs of future generations.

In South Africa things are different. Although the country has presented guidelines for a just transition to greener energies, this has not been out of choice. It’s been out of necessity. It is mainly due to the collapse of the country’s energy infrastructure, not government leadership or a change of mind among the coal lobby.

State-owned enterprises, specifically in electricity, rail and ports, are a legacy of the apartheid state and South Africa’s “post-apartheid” settlement. Being state-owned isn’t a problem, so long as an enterprise is run well. But in South Africa the government has failed to run them well. And failure in these areas has resulted in a turn to the private sector – either to help fix electricity, rail and the ports or to fill the vacuum in other ways.

Even where government has adopted sustainable policies, the private sector has become the major driver of this shift, further worsening inequality.

The problem with greater private sector involvement is the sector’s profit motive. Not only are private sector driven solutions only for those who can pay, they also end up driving public priorities. Thus, those who can pay also drive “development”, instead of government deciding in the interests of society as a whole (now and in the future). This is the reverse of how things should be.

This process of inadvertent privatisation takes the power to make development decisions out of the hands of the people’s representatives (government) and puts it in the hands of private companies. They are driven not by broader societal (even global) interests, but by profit and the interests of shareholders. This undermines democracy and disempowers citizens.

In addition, infrastructure failures have led to “degrowth” in South Africa. Degrowth is the idea that, in order to save our planet, economies must slow or even stop their growth, at least as measured in terms of GDP.

Development will continue to stagnate even after the historic 2024 elections.

I study democracy, citizens’ needs and development, mostly in the global south. In recent articles and books I have pointed to the importance of viewing development in a holistic fashion, focusing on real freedoms, citizen power and needs.

I argue in this article that the outcome of South Africa’s 2024 elections, whichever coalition arrangement emerges, will not change the direction of the country’s economy. This is the case even though the African National Congress (ANC), which has been governing the country since 1994, has been severely punished by the electorate for maladministration and corruption. It lost its parliamentary majority, winning only 40% of the vote.

Infrastructure collapse and inevitable privatisation

There are five main sectors where infrastructure collapse has been most obvious: energy, transport, security, education and agriculture. Here I’ll discuss three.

Energy: Eskom, the state electricity utility, has been failing for a long time. A turnaround strategy is supposedly in place, but rolling blackouts are expected to continue despite the respite for two months. There is now clear evidence that a massive private sector turn to solar power has reduced demand on old, ailing and poorly constructed coal-based infrastructure. Since 2019 demand has fallen by between 1,500MW and 3,000MW.

Transport: The Passenger Rail Agency of South Africa (Prasa) is in near complete disrepair. Poor management, corruption, theft and vandalism have led to a steep decline in the use of rail services by passengers. In 2010, rail passengers completed over 500 million journeys. This number declined to just over 19 million journeys in 2022. The private sector has stepped in here too, mainly in the form of the minibus taxi industry, which is reluctant to go electric.

Transnet, the transport parastatal that manages rail freight, has also been in decline for similar reasons, again for over a decade. It is running (at best) at a third of its capacity.

This has shifted freight onto South African roads and created chaos and bottlenecks at ports. The shift onto roads using private transport companies, which hastens damage to the road infrastructure, is a classic instance of the harmful effects of public sector collapse. And within the next six to nine months South Africans will see the first private trains operating, but will they be the answer?

Security: the privatisation of security in South Africa has been going on for over 25 years, but has reached fever pitch of late. Corruption within and very poor leadership of the South African Police Service has led to inefficient or absent policing and high levels of mistrust of this vital public service. As a result crime levels climb each year. South Africa now has one of the highest murder rates in the world (higher than both Colombia and Mexico).

Unsurprisingly, private security in the country is booming, but only for the wealthy. Since 1997, active personnel have increased by over 400%, and since 2014 registered firms have soared by nearly 86%. The industry is estimated to be worth R50 billion (US$2.6 billion).

Will a coalition government change anything?

South Africa is not only failing to grow – it is one of a handful of countries (along with the UK) that is significantly poorer than it was a decade ago. Its GDP per capita has fallen from US$8,800 in 2012 to US$6,190 in 2023. It is also transitioning to greener energy provision not out of choice but necessity.

South Africa is still a democracy, though. Citizens still choose who represents them in making and managing the macroeconomic infrastructure that determines development. And, given the problems listed above, the country needs change, now. But will the latest elections bring about that change? I think not.

The ANC has lost its majority in parliament, forcing it to seek a coalition partner, or partners. But a coalition government will not solve anything.

Were the ANC to go into coalition (of whatever form) with the Democratic Alliance, the official opposition, it might settle investor nerves due to the business-friendly nature of the DA, but also further empower the DA to serve the elites, and thus undermine the will and capacity of government to drive economic transformation in South Africa.

Were the ANC to go into coalition with the much more left-leaning Economic Freedom Fighters, it would not only unsettle markets but eventually lead to policy paralysis, given the party’s militancy, populism and lack of credibility as a responsible coalition partner. The failures in a number of municipal coalitions attest to this.

And there is little or no mention of sustainability in the main ethno-nationalist alternative, uMkhonto we Sizwe Party.

South Africa desperately needs a real, freedom enhancing choice: a credible party firmly to the left of the ANC. Voters did not have that on this electoral ballot. It is no wonder, then, that the electoral and coalition outcomes will fail to change the country’s current development trajectory.

This article was first published by the Conversation:

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