Regulation of Network Industries in South Africa

Abstract

The 1980s saw a global shift to the liberalization and regulation of network industries which were previously public utilities. Underperforming SOEs and unsustainable debt forced South Africa down this road in the late 1980s with the additional challenge of addressing racially skewed access post-apartheid. In telecommunications, this resulted in a managed liberalization process which has seen private entry but continual structural problems due to a failure to undertake wholesale regulation of the incumbents. Despite a policy advocating structural separation of transmission and generation within electricity, reform stalled due to a shift in government thinking and successful lobbying by Eskom. The regulator, NERSA, has also failed to impose operational efficiency and rein in large price increases. Within transport, aviation was liberalized in the early 1990s with effective regulatory oversight of the airports and navigation systems. However, a dependency on cross-subsidies between ports and rail within Transnet has stalled reform elsewhere.