Defend Truth


The four stages of privatisation of state assets — neoliberalism, corruption, incompetence, collapse


Roger Etkind is a former Numsa official and contract worker and editor of Amandla! ( He worked for Numsa from 1988 to 1995, and then again on contract from 2012 to May 2022.

More than any other single factor, it is privatisation that has degraded public services in South Africa and created the current state of collapse.

Thabo Bester not only escaped from a privately owned, G4S prison; they neglected to tell us about it for nearly a year. In fact, they only “remembered” when GroundUp unearthed the story.

In the UK, Margaret Thatcher’s Conservative Party privatised the supply of water in 1989. Since then, privatised water companies have paid out billions in dividends to their shareholders while failing to spend money needed for maintenance. The result? Sewage is now being pumped out into rivers and into the sea. Not just every now and again. On average 825 times a day in 2022.

What do these apparently different scenarios have in common? They are the result of privatisation. And, more than any other single factor, it is privatisation that has degraded public services in South Africa and created the current state of collapse.

There used to be public services

We live in a world in which it is very common to ridicule the public sector. It is characterised as both incompetent and corrupt. We are fed this story day in and day out, on radio talk shows, on social media, on TV. And when you’re fed a story consistently enough, you tend to believe it. Karl Marx had a way of putting this — “the dominant ideology of every society is the ideology of the dominant class.” In other words, the owning class will tell stories that are in their interests, regardless of what may be factually accurate.

So what is factually accurate? There are those of us who are old enough to remember a time when municipalities had roads departments; public works departments. They employed people themselves to do the work that needed to be done. They may or may not have been efficiently run. (We shouldn’t forget that not all companies are efficiently run. In fact, 5,226 companies were liquidated in South Africa in 2019 alone). But, efficiently run or not, they fixed the roads. And they maintained the water and sewerage systems. And they didn’t pay anybody any dividends either.

So there was no leak from the system as British and American shareholders lined their pockets with dividends from our broken infrastructure.

Why has Eskom failed?

Let’s take Eskom as a case in point. Everybody knows the story of Eskom. It’s a state-owned entity that has failed dramatically. The evidence is not far away from any of us. Rolling blackouts are hardly an indication of success.

And we know why Eskom has failed, because we hear it and read it every day – it has failed because it is owned by the state. Nothing that is owned by the state works properly. Look at SAA. Look at Transnet. The state should get out of the business of trying to run things. Its proper job is to provide an environment that is helpful for private enterprise to do this work. After all, they are the ones who know how to do stuff. Civil servants and politicians just make it all worse.

So with Eskom the answer is simple. Privatise whatever parts of it you can — the parts that can be run profitably. Strip out the role of the state until it is only performing the tasks that private capital is not interested in. At the moment that’s baseload power generation and the transmission system. After all, companies can’t make money from generating power unless there is a grid to transmit it. But it’s unprofitable so the job belongs to the state.

This is the system we sometimes call neoliberalism. The stories that buttress it are its ideological foundation.

Eskom’s manufactured collapse

And sometimes stories need to be manufactured. Worth doing if the result is profitable enough. We see the broken Eskom now. But how did this happen? Part of the answer is that the capacity of Eskom has been consciously undermined. The investment that was needed 25 years ago never happened. It wasn’t Eskom inefficiency. Eskom’s management repeatedly warned the government that new power stations needed to be built to meet the growing demand for electricity.

Similarly, it was the government that gave us the five-year growth, employment, and redistribution (GEAR) plan that failed to invest. This was the government that vigorously promoted privatisation. Why would that be? Well, of course, GEAR advocated the partial privatisation of Eskom: “Eskom should be restructured to operate on a more commercial basis, with parts of the business opened up to private investment.” It specified generation as the function suitable for this privatisation.

And it is generation that has collapsed, as we know only too well. When we talk to workers from Eskom power stations, they speak of deliberate underfunding of maintenance. Maintenance windows dramatically shortened. Budgets cut. Substandard spares.

There is no other way to look at it — Eskom power generation capacity has been consciously degraded. It has been deprived of investment, from the Mbeki government onwards.

Privatisation drives collapse

On the face of it, that doesn’t seem to make sense. Why would the government underfund such a crucial utility? Part of the answer of course lies with so-called fiscal austerity. Reduce government spending and debt levels at all costs. And the costs have been immense.

But when faced with a situation in which people seem to be operating against their own interests, it is useful to see who benefits. And we don’t have far to look.

The story of the incompetence and corruption of Eskom has led us to the independent power producers — the profit-making companies (whose profits are contractually guaranteed for 20-plus years) — becoming the key generators of the next generation of power — wind and solar.

Privatisation has been at least in theory opposed by trade unions and community organisations since GEAR. But now privatisation becomes a much more sellable deal. Anything but Eskom is the mantra. Those opposing it become more isolated voices. The line between a destroyed Eskom and the profits of IPPs is clear.

So these politicians, and the private capital they represent, want to open up what have been public services to private investment. They will derive long-term benefit from the degradation of those public services.

But privatisation has failed

And it’s not as though there aren’t enough examples in the world of the failures of privatisation:

  • UK railways: in the 1990s, the UK government privatised the country’s railway system. This led to the fragmentation of the industry and the creation of multiple private train operating companies. This has resulted in higher fares for passengers (a 40% increase between 2008 and 2018) and poor service quality, and safety concerns. And, of course, profits for the companies — an estimated £3.3-billion in those same years 2008 and 2018.
  • Water privatisation in Bolivia: in 2000, the Bolivian government privatised the water system in the city of Cochabamba, handing control to a foreign consortium. The privatisation led to steep price increases for water. This sparked protests and social unrest. The privatisation was eventually reversed after widespread public opposition.
  • California electricity crisis: in the late 1990s and early 2000s, California deregulated its electricity market and allowed private companies to compete with the state’s utilities. This led to a crisis in 2000-2001: the price of electricity in that year increased by an average of 33% for residential customers and 48% for commercial customers.
  • Privatisation of prisons in the US: in recent decades, many states in the US have privatised their prison systems, allowing private companies to run the prisons. This has created a profit motive for mass incarceration and has resulted in poor conditions for prisoners. These include overcrowding, violence, and lack of access to healthcare. But there is an upside — it has generated $3.3-billion in profits for the two largest private prison companies in the US, CoreCivic and GEO Group. And GEO group also runs prisons in Australia, Canada, UK, New Zealand and South Korea. And of course in South Africa — it has run the Kutama Sinthumule Correctional Centre since 2005.

We could go on. But the real story, the more factual story, is becoming clearer.

Take back the public sector

Here in South Africa, we see a state which fails to function at the most basic level. It fails to provide water, electricity, functioning sewage systems — the most fundamental utilities. But this is not an accident. And it’s not simply because of corruption. It is the result of a deliberate strategy to undermine the public provision of services.

The results are there for all of us to see: privatised services are more expensive and lower quality. They employ less people to deliver these degraded services, so they cost large numbers of jobs. And private companies make big profits from providing them. Public services for the majority are degraded. Anybody who can afford to buy private services to substitute for the dysfunctional public ones — education, health, security, now electricity.

And the contracts for these outsourced services provide almost infinite opportunities for corruption.

The message is clear. A privatised and privatising state is a dysfunctional one. It’s time we all realised that and started fighting vigorously to reverse this strategy. DM

First published in Amandla magazine.


Comments - Please in order to comment.

  • Bruce Young says:

    It really is astonishing that someone can actually now believe that privatisation is the problem. This is so divorced from reality it is hard to know where to begin.

    Perhaps we should start with a cold beer. Never been a problem there. You can buy a cold quart in the remotest corner of the country any day of the week. We also have some of the cheapest beer in the world.

    But let’s nationalise that. Then there would be beer shortages but there would be no profits and regular bailouts of the national beer company.

    How would the bailouts be funded? From tax of course. Where would the tax come from? From taxing the evil profits of private companies. Oh but we are nationalising those.

    How would the bailouts be funded? Where would the tax come from?

  • Tim Price says:

    The circuitous socialist argument yet again. Cherry picking privatization problems and all he can come up with is four? I bet there are more, but there are probably hundreds of other success stories. As against the thousands of socialist failures, our own government being one of them. When did the rot really set in at Eskom? When the ANC cadres decided it had to be an SOE. Its been run into the ground like the rest of them since then. Mr Etkind’s credentials speak for themselves.

  • Ben Cobbing says:

    I think a debate between private or public sector competence should not be a binary choice. Many private sector initiatives fail in their ability to deliver, as do many public sector entities. In South Africa, we could probably agree that SARS is pretty good public enterprise example, as REMGRO is a private one. But for me, the key difference is that one rarely sees a private institution fail and continue to fail (well unless one is talking about bank bailouts of course – LOL); generally a private institution can only run at a loss, or fail for so long. A public sector institution can run at a loss, or fail so long as the government continues to bail it out – which might be due to a political ideology, as opposed to a financial or service delivery record reason to succeed.

    I think what we need in South Africa are well run public AND private institutions, not one or the other.

  • Fox Bravo.. says:

    Awesome Roger – see you next week at the flat earth society meeting…

  • Johan Buys says:

    I’m sorry, but this author is ignoring the elephant in the room. Let’s stick to Eskom as the municipal case studies would be too varied.

    The state decided not to expand Eskom capacity. It is NOT true that capacity expansion is of no interest to private investors. By FAR the majority of electricity sales outside China and communist states is by way of privately owned utilities that compete in same distribution zones for clients and have diversified modern fleets plus they operate an electricity exchange among each other. The private sector will no more run out of capacity than PnP and Woolworths stop adding stores.

    The author has the sequence wrong. It is incompetence (cadre deployment) and corruption among comrades that flushed north of R700 billion out of Eskom and Transnet.

    Eskom can be profitable if it is run professionally. Eskom cannot be run profitably when the AVERAGE salary is north of R800,000 per year and contracts are awarded corruptly.

    We can run a simple experiment. License two power stations to private sector to fix and run for five years and compare those station’s EAF and cost per kWh to Eskom.

    Then, do same with the rest of the fleet

  • Sydney Kaye says:

    You are comparing South Africa to countries with a functioning government and civil service where there could be an argument in some cases for the state to provide some functions . Since South Africa has neither that argument had no legs here.

  • Cobus vdM says:

    Keep restricting privatisation to cadres and corrupt companies fronting ruling politicians’ bank accounts, and I can agree with the article to some extent, however…
    The one big advantage of privatisation is that it opens up free market competition. This is something that public ownership will never achieve since it invariably leads to protection of vested interest under the guise of national strategic capability.
    The instances mentioned where privatisation failed is due to the specific restriction of free market competition. Some of these deals were set up to prevent any competition for at least an initial time period, ostensibly to provide the provider time to recover its investment. Not really free market is it? This recreated the same problem as public ownership – no consequences for poor performance.
    The way forward in my humble opinion is to:
    a) Allow the government to stick to its business which is NOT trying to compete with industry but RATHER to set policy and regulations that will allow free market competition yet still protect the energy future of the country in a way that will not destroy economic growth but stimulate it with guaranteed abundant supply.
    b) Develop policy and regulations that serve in the best interest of citizens and industry.
    c) Allow private suppliers to enter with standardised micro-grid offers and guaranteed localised supply. This will also alleviate the massive issues with the current national distribution network.
    d) De-politicise municipalities and stop selling electricity at marked-up price to consumers as a means to create revenue. I am not getting my banking services or mobile connectivity from the municipality. Why should that be the case for electricity if a standardised microgrid is maintained and electricity supplied by the supplier that offers the best price value proposition to its customers?

  • Johnny Kessel says:


  • Tony B says:

    Oh OK, now I understand!
    Privatisation is responsible for the losses [as reported for FY2019/2020] by:
    Central Energy Fund (-R450 M), Denel (-R1750 M), Eskom (-R20700 M), Independent Development Trust (-R107 M), Industrial Development Corporation of SA (-R3000 M), Land and Agricultural Development Bank of SA (-R2124 M), Passenger Rail Agency of South Africa (-R1690 M), PetroSA (-R1600), South African Nuclear Energy Corporation (-R131 M), South African Post Office (-R900 M), South African Airways (-R5400 M), South African Broadcasting Corporation (-R600 M), South African Forestry Company (-R80 M) …
    Hey, hang on. These are all fully state-owned enterprises!
    Oh, no. I’m confused again!

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