Public and private sector involvement in the provision of electricity in urban areas of South Africa

Master Thesis


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University of Cape Town

This study examines the involvement of public and private sector institutions in the provision of electricity in urban areas of South Africa. Access to electricity in South Africa is highly unequal and little progress is currently being made to bring electricity to all, mainly due to institutional and financial problems. The focus on public and private sector roles is adopted because of the social importance and economic nature of electricity provision, the global and national significance of privatisation policies, and the current importance of allocating appropriate roles to the public and private sectors in widening access to services, including electricity, in South Africa. The distribution sector of the South African electricity supply industry (ESI) is highly fragmented. Municipal electricity departments, which mostly serve white residential, commercial and industrial areas, are generally highly profitable and provide an effective service, but are not highly efficient by international standards. These departments are self-sufficient in the implementation of electrification projects, and have access to adequate capital to finance such projects. Electricity distribution authorities set up to serve black areas, especially electricity departments of black local authorities, are ineffective, and often financially unsound. Due to the weakness of public authorities charged with the task of undertaking electrification projects in black areas, the implementation of these projects is dependent on the involvement of private electrical consultants and contractors. However, few such projects are currently being undertaken due to inappropriate planning and shortages of concessionary finance. After close consideration of the benefits and drawbacks of public and private involvement in range of activities that arise from electricity provision, it is concluded that the key challenges facing the ESI in South Africa will best be met if the distribution sector is restructured on a regional basis in order to utilise existing expertise, and retained within the public sector. Accelerated electrification initiatives, planned and co-ordinated by these distribution authorities, would draw upon the experience and capabilities of private electrical consultants and contractors. Public sector leadership in mobilising both public and private investment would also be necessary. Thus, whilst public institutions would be dominant, important roles would remain for the private sector in the provision of electricity in urban areas. The results of this study suggest that far from privatising service provision in South Africa, it will be essential to allocate a dominant role to the public sector in widening access to services to all.

Bibliography: pages 163-172.