Energy and the Apartheid State

Modern industry and commerce rely on energy to function. In South Africa, this energy sector was dominated, throughout the period of 1948 to 1994, by state-led power suppliers, most notably, the Electrical Supply Commission (Escom) and Sasol. In addition, there was the Atomic Energy Corporation (AEC). These companies made up the bulwark of the energy sector during the Apartheid era. This essay will be examining the relationship between the energy sector and the Apartheid state. The crucial discourse within this essay will be to determine the intent and effectiveness of Apartheid energy policy. This paper will ultimately find that energy policy was aimed at utilising parastatals to advance an agenda of economic nationalism.

Before analysing the relationship between the energy sector and the state and its role in development, it is crucial to understand the ideology and intent that provided the framework to these policies. Prior to 1948, Southall (2007) argues that parastatals were established to service the minerals-energy complex (MEC).[1] In this way, mining capital was prior to energy development policy. Electrification was a response to a need by mining capital. Mining magnates had a need for cheap electricity to enhance their production capacity. Kimberly, to drive home the point that electrification is interlinked to mining, was the first city in Africa to receive electric lighting.[2] Gentle (2008) argued that energy policy and mining capital were effectively synonymous.[3] In response to the need for electrification, mining magnate, Cecil John Rhodes, established the Victoria Falls & Transvaal Power Company (VFTPC).[4] VFTPC was, essentially, a foreign company, getting rich from powering South African mining. The Anglo-American corporation demanded it be expropriated, illustrating a rise in economic nationalism.[5] Similar sentiments were on the increase, with rising worker radicalism, global concerns with laissez-faire Capitalism and growing support of economic sovereignty.[6] With the electoral victory of the National Party in 1948, the new regime could address these concerns and use the strategic power of the energy sector to advance their ideology in the country.

The Apartheid regime’s energy and industrial policy was shaped from economic nationalism. The National Party wanted South Africa to achieve energy self-sufficiency so it could be truly economically sovereign. Davie (1995) argues that this was due to threats of oil sanctions, thus necessitating synthetic fuels by Sasol.[7] But, the only meaningful sanctions began in the 1980s, decades after the founding of Sasol.[8] Rather, Sparks (2016) contests, the synthetic fuel effort was a common trend among many countries looking to secure fuel sovereignty.[9] Sasol’s founding manager director, Etienne Rousseau, reportedly referred to Anglo-Vaal as “the Jews”, illustrating the discriminatory rhetoric used to advance economic nationalism.[10] In this way, it wasn’t so much any fear of sanctions that encouraged the Apartheid energy policy, but an ideology centred on independence and exclusion. With the power of economic sovereignty, parastatals could then be used to enact social engineering policies.[11]

Energy is crucial to development in that it is a required feature of modern industry. South Africa was attempting to industrialise along a western framework of development, what this essay will call ‘modern industry’. When combined with the Apartheid notion of economic nationalism, this generates a desire for an industrial state that has no need to rely on foreign trade. In this manner, energy policy was directed to control the lifeblood of industry, so to always control any possible foreign industry in South Africa and to ensure that foreign influence could not threaten South African industry. This was not so different from pre-Apartheid policy. South African Torbanite Mining and Refining (SATMAR), a subsidiary of Anglo-Vaal, relied on tariff protection.[12] This was in line with the idea that MECs directed energy policy.[13] Where the shift happened was when energy policy became the purview of the National Party government, which used it as a means to ensure South African dominance of its own economy. So, while energy was still used to advance industry, it became a political tool to guarantee industry advanced in the manner the state wished.

The Apartheid energy policy was diversely spread among its energy parastatals. Each was used to execute heavy influence over industry, to maintain power and achieve economic sovereignty.

Escom was the prime electricity producer. It was given relative political independence, not receiving state subsidies or state mandates above its core task.[14] Escom had one job – ensure there was enough electricity.[15] Escom’s relationship with the state was, for the most part, utilitarian. It existed to provide electricity to the nation and growing industry. In exchange, the parastatal received a monopoly status.[16] It can be surmised, however, that Escom was a part of the general public investment structure to promote Apartheid policies.[17] As a primary electricity producer, Escom wielded massive economic power, as it determined if many industries were to be allowed to function, or not. In this way, the state held influence over the modern economy, with Escom as its sword. This influence was threatened in 1983, when the De Villiers Commission suggested that Escom, among others, become privatised.[18] Gentle argued that this was due to a growing neoliberal consensus.[19] Fine (2016) contends, rather, that the possible privatisation was fashioned from the necessity to address Apartheid’s debt crisis.[20] The answer cannot truly be proven, as Escom was not privatised, but it is more likely (keeping in mind the state’s economic nationalism) that necessity was the more convincing reason.

Sasol was the state’s attempt at fuel sovereignty.[21] State intervention was used in several ways to find alternative fuel sources to stop South Africa’s reliance on foreign oil.[22] While Sasol was reported as highly profitable, Davie argues that this is due to it being protected by state regulations and subsidies, without which it would fail.[23] An analysis of Sasol-state relations reveals a relationship of stark dependence – whereby the parastatal was heavily subsidised, despite its bad business model and unprofitability. An example of the ineffectiveness of this business model can be seen in that Sasol’s synthetic fuel cost $45 a barrel (to break even), while crude oil cost between $15-$25 a barrel.[24] Even during the 1979 Oil Crisis, crude only jumped to $40 a barrel.[25] According to Conlon (1995), this was due to an archaic and expensive refining process.[26] Despite this, Sasol was profiting in the billions.[27] Through the guise of Sasol and synthetic fuels as a strategic industry, Sasol was able to achieve tariff protection and a myriad of regulations that protected its profitability, in spite of its inefficiency.[28] Davie argues that, while the state received R14 billion in a return of an investment of R4.9 billion into Sasol, this was at an expense to the rest of the economy.[29] Protectionist policies and regulations to prevent competition ensured Sasol’s survivability. Protectionism and regulations were justified by the idea that they ensured job security.[30] But, the economy suffered under unnecessarily expensive energy resources, such as non-competitive plastic prices that strangled manufacturing jobs.[31] It was clear that Sasol, and attempts at achieving energy self-sufficiency, damaged the economy.[32] Deregulation, Engen’s Rob Angel argued, could have saved the industry as much as R2.5 to R4 billion per a year.[33] In this way, as opposed to Escom, Sasol was an ideological entity, simply aimed at attempting the ideological goal of fuel sovereignty. If the state could retain control over fuel, it would never have to fear sanctions or a trade deficit. It could shape the country with impunity, with full knowledge that it controlled the life-blood of industry.

The role of the Atomic Energy Corporation regarding energy policy was more as a companion to Escom, which it provided with uranium for nuclear power.[34] Otherwise, uranium in South Africa is more integral to understanding South Africa’s role in the Cold War allies, as it provided resources for weaponisation and research.[35] This alliance may be a cause of why countries like the United States were reluctant to level sanctions, but that can only be surmised. Other than that, the AEC was not crucial to energy policy, and took a backseat to Sasol’s synthetic fuels as a possible alternative energy source.

This essay has shown that the steering ideology of Apartheid energy policy was economic nationalism, and as such, pushed parastatals to adopt policies that would ensure fuel and electricity independence. This was in an effort to industrialise the country in such a way that it would not become dependent on foreign trade. With the exception of Escom, this energy policy failed to achieve sustainable development – becoming hugely dependent on state regulations and subsidies. The energy policy failed, with sanctions wracking the economy in 1986 and debt forcing the economic nationalist state to contemplate privatisation.

References

  • Auf der Heyde, Thomas. “The Nuclear Fuel Chain in South Africa.” In The South African nuclear fuel industry. 3-4. Cape Town: Energy for Development Research Centre, 1993.
  • Davie, Kevin. “Apartheid and the Cost of Energy Self-Sufficiency.” In Embargo Apartheid’s Oil Secrets Revealed. Edited by Richard Hengeveld and Jaap Rodenburg, 242-253. Amsterdam: Amsterdam University press, 1995.
  • Electricity in South Africa – Early Years. Accessed April 20, 2017. http://www.eskom.co.za/sites/heritage/Pages/early-years.aspx.
  • Gentle, Leonard. “Escom to Eskom: From racial Keynesian capitalism to neo-liberalism (1910-1994).” In Electric Capitalism: Recolonising Africa on the Power Grid. Edited by David MacDonald, 50-69. HSRC Press, 2008.
  • Kenny, Andrew. “The rise and fall of Eskom – and how to fix it now.” @Liberty 18, no 2 (2015): 1-22. http://irr.org.za/reports-and-publications/atLiberty/files/liberty-2013-the-rise-and-fall-of-eskom-2013-and-how-to-fix-it-now. Accessed April 5, 2017.
  • Southall, Roger. “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” in State of the Nation: South Africa 2007, edited by Sakhela Buhlungu, John Daniel, Roger Southall & Jessica Lutchman, 201-225. Cape Town: HSRC Press, 2007.

Footnotes

Sparks, Stephen. Between ‘artificial economics’ and ‘the discipline of market forces’: SASOL, from State Corporation to Privatisation. 1-15. https://www.ru.ac.za/media/rhodesuniversity/content/politics/documents/Sparks%20-%20SASOL%20Privatisation%20draft.pdf

[1] Roger Southall, “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” in  State of the Nation: South Africa 2007, ed. Sakhela Buhlungu, John Daniel, Roger Southall & Jessica Lutchman (Cape Town: HSRC Press, 2007), 201.

[2] Electricity in South Africa – Early Years, Eskom, accessed April 20, 2017, http://www.eskom.co.za/sites/heritage/Pages/early-years.aspx.

[3] Leonard Gentle, “Escom to Eskom: From racial Keynesian capitalism to neo-liberalism (1910-1994),” in Electric Capitalism: Recolonising Africa on the Power Grid, ed. David MacDonald (HSRC Press, 2008), 65.

[4] Ibid., 58.

[5] Ibid., 58.

[6] Stephen Sparks, Between ‘artificial economics’ and ‘the discipline of market forces’: SASOL, from State Corporation to Privatisation, https://www.ru.ac.za/media/rhodesuniversity/content/politics/documents/Sparks%20-%20SASOL%20Privatisation%20draft.pdf, 1.

[7] Kevin Davie, “Apartheid and the Cost of Energy Self-Sufficiency,” in Embargo Apartheid’s Oil Secrets Revealed, ed. R Hengeveld and J. Rodenburg, (Amsterdam: Amsterdam University press, 1995), 242.

[8] http://www.snf.ch/sitecollectiondocuments/nfp/nfp42p/nfp42p_staehelin-e.pdf

[9]  Sparks, Between ‘artificial economics’ and ‘the discipline of market forces’: SASOL, from State Corporation to Privatisation, 3.

[10] Ibid., 4.

[11] Southall, “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” 201.

[12] Sparks, Between ‘artificial economics’ and ‘the discipline of market forces’: SASOL, from State Corporation to Privatisation, 4.

[13] Gentle, “Escom to Eskom: From racial Keynesian capitalism to neo-liberalism (1910-1994),” 65.

[14] Ibid., 58.

[15] Andrew Kenny, “The rise and fall of Eskom – and how to fix it now,” @Liberty 18, no 2 (2015): 5, http://irr.org.za/reports-and-publications/atLiberty/files/liberty-2013-the-rise-and-fall-of-eskom-2013-and-how-to-fix-it-now, accessed April 5, 2017.

[16] Southall, “The ANC, black economic empowerment and state-owned enterprises: a recycling of history?” 216.

[17] Ibid., 204.

[18] Gentle, “Escom to Eskom: From racial Keynesian capitalism to neo-liberalism (1910-1994),” 64.

[19] Ibid., 64.

[20] Sparks, Between ‘artificial economics’ and ‘the discipline of market forces’: SASOL, from State Corporation to Privatisation, 2.

[21] Ibid., 3.

[22] Davie, “Apartheid and the Cost of Energy Self-Sufficiency,” 242.

[23] Ibid., 242.

[24] Ibid., 243.

[25] Ibid., 243.

[26] Ibid., 243.

[27] Ibid., 243.

[28] Ibid., 243-244.

[29] Ibid., 246.

[30] Ibid., 249.

[31] Ibid., 245.

[32] Ibid., 251.

[33] Ibid., 252.

[34] Thomas Auf der Heyde, “The Nuclear Fuel Chain in South Africa,” in The South African nuclear fuel industry, (Cape Town: Energy for Development Research Centre, 1993), 4.

[35] Ibid., 3.