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Post office, Telkom, Eskom becoming obsolete

Date Released: Mon, 25 May 2015 18:35 +0200

TWENTY years ago, it was unthinkable that SA could manage without efficient service from the post office, Telkom and Eskom. That has changed.

Today, the post office hardly matters in economic terms. Electronic mail has rendered its core function of letter delivery virtually obsolete.

Management’s unwillingness to curb widespread theft meant that parcel delivery has been increasingly replaced by private couriers. As a result, the four-month post office strike last year scarcely registered on the economic radar.

Companies still adversely affected by nondelivery of bills are likely to switch to e-mail while courier companies gain greater shares of parcel delivery.

This will reduce the post office’s importance even further.

Telkom remains important, especially for online data. But that role is shrinking too. Whole suburbs are now linked to ultra-fast fixed-line connections provided by Telkom’s competitors.

Telkom is probably much less significant than its largest cellular rivals and its attempt to find an overseas partner to help up its game was quashed by the government for ideological reasons.

Eskom is still very important economically. Lack of adequate electricity supply is having a far more negative effect than officially admitted.

Eskom’s customer base is also being eroded by blackouts and the soaring price of electricity. For decades, the gold mines were Eskom’s largest customers. Dramatic electricity price increases are admittedly only one of the reasons for the plummeting decline in South African gold production, but the consequence is that Eskom’s largest customer base is disappearing.

High prices are also driving resistance to paying for electricity from poorer households, building on the country’s history of popular nonpayment for services.

Richer households are investing in alternatives such as generators and solar panels. While these are much more expensive than Eskom’s supply, changing technology and Eskom’s demands for continued price increases (the latest is six times the current inflation rate) will erode this.

The recent announcement by Tesla, a US manufacturer of electric cars, that it has developed a battery for household use is an important example of where technology may take us.

One critic is reported to have said it is silly to store electricity because it is cheap, suggesting that "it is like building a safe to store potatoes".

But in a famine potatoes are worth more than gold.

South African households would love to store electricity for use during blackouts if they could afford to.

Rich households can already afford to buy the technology.

Once they have made the capital outlay on solar panels and batteries and gone "off grid", they will not return.

The loss of these consumers will have profound repercussions for municipalities that earn revenue by on-selling power.

Technology will become much cheaper in the years ahead.

This is because nonconventional sources of electricity generation and storage are being driven by much larger forces of global environmental concern.

Solar and wind generation are currently much more expensive than fossil fuels or nuclear. This is partly because they are less reliable as they depend on it being windy or sunny to generate electricity.

But if cheap mass storage of electricity is achieved, making it possible literally to save electricity "for a rainy day", the price of non-conventional generation will fall sharply.

It is thus not far-fetched to imagine that, in a few years’ time, home-based power generation may transform electricity supply in the same way cellular phones eliminated the need for landlines. Such options could extend into business and industry, as the example of a major Durban truck manufacturer becoming self-sufficient through solar power demonstrates.

Eskom may yet regret the huge price increases it has demanded to compensate for its capital overexpenditure and the use of diesel generators to cover construction delays. Together with outages, there are now powerful incentives for its customers to exit it and not return.

The debate about privatising parts of Eskom may drag on but be overtaken by events and the choices of thousands of individual consumers.

Articule by: Gavin Keeton

Gavin Keeton is with the economics department at Rhodes University in Grahamstown.

Source: BusinessDay

Source:Business Day