Nationalisation And The New Eskom Boss

Considering how badly South Africa’s parastatals are run, creating more of them is not a good idea.

- James Brent Styan

The word nationalisation is getting thrown around with increasingly reckless abandon in South Africa these days. Its basic definition is to transfer a major branch of industry or commerce from the private sector to state ownership or control.

Some want to nationalise banks, mines, land; others want the state to start up its own versions of certain entities, forgetting perhaps there are already state-owned entities in these areas like the DBSA and Alexkor.

It may be useful to step back a moment and dwell on why governments get involved in industry. The main reason, and the only real valid one, in my opinion, is that the state gets involved in sectors where the private sector does not want to get involved. This tends to be in sectors where the private sector – accountable to shareholders looking for profits – does not think there is money to be made so it would rather not invest.

Yet, states believe these industries or businesses are vital for society to function. The state is not accountable to shareholders, only to voters expecting the state to act in their best interests, even if it means spending money on loss-making enterprises. This does not mean, of course, that the state shouldn’t be operating those businesses responsibly and in the best possible manner.

One example would be public transport, and in particular public trains. Railways are notoriously expensive and difficult to operate. They require huge capital investments and in developing countries like South Africa, where the ticket prices cannot be too high as most won’t be able to afford the fare, this is not a good business case. So the private sector won’t be seen building railway networks worth billions across the country.