The crippling of Eskom is a textbook example of the follies and dangers of affirmative action and BEE (Black Economic Empowerment).
Under apartheid, which was a racist form of socialism, Eskom provided the
world’s cheapest electricity, very reliably. It has been systematically
ruined by the ANC government, with permanent harm to the economy.
The ANC converted Eskom from an electricity utility into an instrument of
patronage and political engineering. For political reasons, during the
1990s, tariffs were kept too low and power stations not built when it was
obvious we needed them. So we ran out of electricity in 2007, with
devastating consequences. Eskom’s excellent coal supply was ruined.
Power stations were badly maintained and run too hard, so that they are now
failing. Medupi and Kusile Coal Stations were built in a panic, with bad
designs, bad contracting, poor workmanship and costly corruption. Eskom
cannot service its huge debt. Affirmative Action and BEE played a very big
part in this destruction.
I must point out that many of the most stupid Eskom decisions were taken by
white managers, especially in the financial section. This must be added to
the harm of affirmative action and BEE.
By “affirmative action” I mean “racial affirmative action”, where race is a
criterion for appointment. The policy is a lie from the start. Nobody
believes in affirmative action for the services they themselves receive.
Nobody would choose affirmative action teachers for their children. Look at
the schools ANC politicians choose for their children. Affirmative action is
degrading. It is an insult to call someone an affirmative action employee.
It demoralises the blacks appointed because of it and the whites not
appointed. Competent blacks suffer the affirmative action stigma. It leads
to a sense of both entitlement and resentment by those who receive it. It is
ruinous for efficiency.
In Eskom, qualified and experienced white engineers and managers were
persuaded to leave (often with generous packages) and replaced by less
qualified and experienced blacks. This was “space creation”. Eskom managers
were rewarded for increasing their proportion of black staff. This explains
their huge bonuses amidst load-shedding. More and more people were employed,
with high salaries. A white manager would be replaced by two or more black
managers. Eskom now employs twice as many people as utilities of the same
electricity production elsewhere in the world. Its wage bill went up, while
its performance went down.
BEE is essentially legalised corruption. In many African countries, if a
company wants to do business with the state, it has to give bribes to
leading politicians. In South Africa it has to be “BEE Compliant”, which is
pretty much the same thing. The BEE beneficiaries are usually connected to
the ruling party.
Probably the worst BEE in Eskom is coal procurement. Coal stations require
enormous amounts of coal, typically 15 million tons a year for a big Eskom
coal station. You cannot move such amounts economically over long distances,
so the station must be built next to a coal field, as happened in South
Africa. The mine would be run by a big mining major, such as Anglo-American,
and the coal delivered to the station by conveyor belt. The system worked
well. It took full advantage of our coal, which is cheap and plentiful but
of low energy and high ash. Eskom led the world in burning poor coal.
I was a junior engineer at Hendrina Power Station in 1987 and visited the Optimum
Coal Mine (now much in the news) that supplied it. The coal was separated by
the mine into better quality, which was exported, and worse quality, which
went to Hendrina. Although poor, it was of consistent quality and Hendrina
was set up to burn it. It worked well.
Then came BEE coal procurement. The existing coal mines were disliked by the
ANC because they were run by big, white-owned companies (“White Monopoly
Capital”). So instead coal was bought from BEE coal mines far away. The coal
was chosen not on price or quality but on a hierarchy of ownership: first
small black female, then small black male, then big black female – and so
on. The coal was expensive, bad and inconsistent, and had to be brought long
distances by rail or, much worse, by road, with horrible environmental
consequences. Up went Eskom’s coal bill, down came its performance. In
January 2008, when the rain fell on the miserable stockpiles of bad BEE
coal, they turned to slush and shut down a large number of our power
stations, and then our gold mines.
As usual the worst victims of Affirmative Action and BEE are poor black
people. They are the ones who suffer when their municipality appoints an
affirmative action engineer for their water supply and sewerage. They are
the ones who suffer when it uses very expensive BEE procurement for its
services and equipment. And they are the ones who will suffer most from
rising unemployment and increasing poverty as the economy reels under
Andrew Kenny is a professional engineer, a freelance journalist and a liberal.