Scoundrels' ploy to protect profits pounds the poor
When businesses start banging on about saving jobs, what they're really worried about is losing money
Protectionism is the last refuge of the scoundrel.
When simple customer demand isn’t enough, businesses appeal to base nationalism and invoke the need to protect jobs or, in a uniquely South African variation, the jobs of black people.
Protectionism is a worldwide problem.
Donald Trump is busy lining the pockets of steel barons with other Americans’ money under the guise of protecting nationalist American interests from China. Britain is committing an act of epic self-harm to “take back control” via Brexit.
In South Africa we’ve seen the same instinct at work in our pay TV industry, electricity industry and even banking. When business people start espousing the importance of protecting jobs, see it for what it is: their ambition to keep profits high.Last week, DStv argued before industry regulator Icasa that it should be protected from online streaming video services such as Netflix and Amazon, saying it should protect its 8,000 employees, most of them black.
DStv has gouged consumers for decades. When last measured, it commanded more than 98% of all paid-TV subscriptions in South Africa, having fought off all challengers from the strong base it built with its apartheid-era protected monopoly.
It connived with the Guptas to influence the Communications minister into backing digital technology that would allow it to protect its monopoly (though DStv owner Multichoice denied this was the reason it paid the Guptas millions). It has been fined millions by the Competition Commission for price-fixing. Icasa has asked DStv to provide evidence that its subscribers really are switching to online providers. But even if DStv produces it, so what?To now argue that its interest is to protect jobs is laughable. How many jobs have suffered from the fact that South Africa’s consumers have had their disposable income sucked up by overpriced TV services for decades, diverting spending power from several other industries that could have employed even more people?
And then there is the electricity industry.
Like DStv, Eskom and its distributing municipalities are being squeezed by technology. The plummeting cost of solar panels and storage batteries means it is easier than ever to go “off grid”. Globally, companies such as Tesla are boasting of reducing consumer electricity costs by 92% using solar panels and Powerwalls.
Given the dramatic increases in electricity costs in South Africa over the past several years, you can easily imagine similar stories here. But the vested interests in the electricity market are having none of this.
There is the bloated, creaking, financially calamitous, CO2-belching, corruption-infested Eskom. Then there are the municipalities that add a margin to Eskom costs and distribute electricity to consumers. That margin often accounts for a large piece of municipality budgets. These interests fight for their turf by frustrating any alternative way of getting electricity.
Late last month the National Electricity Regulator of SA (Nersa) published draft new rules that will require anyone generating less than 1MW of electricity to register with it. Even a single panel on a rural house that powers a TV and cellphone charger would theoretically have to register.
Registration is far less draconian than licensing, which could effectively be used to bar small-scale generation completely. Those producing less than 1MW have been exempted from licensing for a year, supporting the flourishing of rooftop solar plants on shopping centres and other commercial buildings.But clearly, that flourishing is seen as a threat in some circles. Nersa’s proposed regulations require anyone generating electricity, no matter how small, and whether it is being consumed by the generator or distributed to other consumers, to register. There is also a registration fee contemplated; that will be set by separate regulations and we have no idea how much that might be.
What is the purpose of this requirement? The only conceivable one is an instinct to control, so as to protect vested interests.
Large-scale production introduces technical issue around distribution and access to the national grid that make licensing sensible. But at the small scale, the only issue that seems to be guiding regulation is the fear that consumers will abandon Eskom and municipal distributors, so bureaucracy and cost are being erected as a barrier. Again, consumer spending power that could be directed at competitive providers of goods and services is being sapped to protect inefficient, uncompetitive providers.Protectionist special pleading was also on display over the curatorship of VBS Mutual Bank. Days before the Reserve Bank put VBS into curatorship after it serially defaulted on obligations through the National Payments System, the then chairperson of the bank, Tshifhiwa Matodzi, wrote to the registrar of banks protesting against at the curatorship he knew was coming. His demand for special treatment centred on the bank’s status as being black-owned, declaring that the bank’s problems stemmed from “a well-organised, and powerful system which does not tolerate growing black banks and black excellence”.
It has since turned out that the bank’s books had been cooked to hide hundreds of millions of loans to related parties.
When a business needs politicians and regulators to protect it from the consequences of competition and poor decision making, it is a business that often should not exist.
Protecting it provides a harbour for inefficiency and amounts to a tax on consumers, decreasing their overall spending power and diverting that spending from other companies that can compete on merit. Whole countries are rendered less competitive, and their consumers poorer, as a result.