Beyond the State and Profit Motive in the Delivery of Public Services

By Dale T. McKinley · 11 Feb 2013

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If ever there was a classic example of the fundamental contradiction informing the raging debate about South Africa’s ‘developmental model’ (and thus the macro-framing for the delivery of public services), it is to be found in the ongoing ESKOM saga.

On the one hand, the ruling ANC recently emerged from its Mangaung conference with a clear resolution (on ‘economic transformation’) for “increased state ownership in strategic sectors, where deemed appropriate on the balance of evidence, and the more effective use of state-owned enterprises.”

On the other, in motivating for ESKOM’s present request for a 16% yearly increase in electricity tariffs over the next 5 years, CEO Brian Dames categorically stated that the only way for there to be a “secure supply of electricity” and for ESKOM to be “financially sustainable” is to ensure that tariffs “cover the full cost of supplying electricity”.

The contradiction is painfully obvious. For the ANC and all those in support of it’s by-now clearly enunciated ‘developmental state’ agenda, the prime means of ‘intervention’ to address South Africa’s gross socio-economic and service inequalities is the delivery of public services (which clearly must include accompanying infrastructure) through majority state-owned entities. For this to make any contextual developmental sense, the inherent assumption has to be that a state-owned delivery mechanism equals public service provision beneficial to the majority of South Africans – i.e., the broad working class/poor. 

And yet, when it comes to such intervention by ESKOM – a majority state-owned entity – its own management seeks to deliver a public service (electricity) through a commodified, cost-recovery model wholly consistent with a corporatised, capitalist market-defined delivery mechanism. Why? Because even though ESKOM is a (majority) state-owned entity it is practically run as a corporation, with the profit motive at the forefront of its revenue (and thus sustainability) model.

Extending the contradiction, the ANC has now come out publicly against ESKOM’s tariff increase request. In other words, the very party that runs and is in control of the state, wants to falsely separate its own chosen means from its own declared ends as soon as the former becomes politically risky (noting that national elections are just around the corner). Indeed, it appears that the ANC and its relevantly deployed Ministers have, for some time, been seriously confused when it comes to understanding the intrinsic connection between such means and ends.

Late last year, Public Enterprises Minister Malusi Gigaba simultaneously promised more private involvement in state-owned entities like ESKOM while rejecting the “privatisation of any of the entities”. Around the same time, while lauding the developmental benefits of the state’s 3-year, R844 billion infrastructural rollout, Minister of Economic Development Ebrahim Patel was at pains to point out that a sizeable portion of the needed funds would come from fees and levies charged by state-owned entities such as ESKOM. 

It is precisely this glaring contradiction of both intent and purpose, of means and ends when it comes to the delivery of public services that is at the core of a hugely important new book entitled ‘Alternatives to Privatisation: Public Options for Essential Services in the Global South’ (Edited by David Macdonald and Greg Ruiters, HSRC Press, 2012).

As the editors point out, the base rationale behind the voluminous text is to “directly address the questions of what constitutes alternatives, what makes them successful or not, what improvements have been achieved and what lessons are to be learned for future service delivery debates”. The book engages these questions through critical analyses of the form, content and context of alternative public service delivery mechanisms combined with case studies on such initiatives in over 50 countries in Africa, Asia, and Latin America covering health care, water/sanitation, and electricity.

Crucially, the book sets out a three-pronged definitional framework for alternatives: “single public entities that are entirely state-owned and operated; single non-state organisations that operate independently of the state on a not-for-profit basis and are oriented to principles of equality and social citizenship; and, partnerships (where) two or more public and/or non-profit entities work together to deliver a service”. Crucial for two reasons: because non-state actors are included in notions of the public, “helping to get beyond the stale positions staked out in the public-versus private debate”; and, because all forms of private, for-profit actors are excluded whether they be “governmental, non-governmental, or community-based organisations”.

As the numerous case studies confirm, ‘alternatives’ are not just about the degree of state or non-state ownership and control but rather must be judged on the basis of “who is served and how”. This makes even more sense when placed within the national and global context of a dominant neoliberalism that has – as chapter authors Ben Fine and David Hall convincingly argue – required “a qualitative shift in the nature and capabilities of the state itself as it has become increasingly oriented towards regulating and promoting the private sector as opposed to serving public provision.”

Thus, the entire debate about more state intervention (ostensibly in order to ‘protect’ the public sphere and better deliver public services to those that need them most) is little more than a rhetorical exercise unless that state “has been radically democratised” in both form and content. Otherwise, the practical import of more state ownership and intervention will, as the global record over the last twenty years has so clearly shown, result in the state being used to further reassert and embed a statist neoliberal agenda and profit-defined market ideology. 

The ANC/South African state can talk all they want about more state ‘ownership and intervention’ while pouring hundreds of billions over the next few years into ‘delivering’ various social services and infrastructure (whether through ESKOM or any other state entity). However, as long as the political decision-making process as well as the character of the chosen practical ‘delivery’ mechanisms of such a ’developmental’ agenda lack inclusive democratic form and decommodified content, there is every likelihood that it will end up being an exercise in developmental futility ( at least for the majority). 

Simply put, it is the type of state as well as how it engages with and operates within, the dominant social, political and economic relations that really matter. This is what is mostly missing in South Africa’s ‘developmental’ debate and more specifically, as applied to the practical means employed by state-owned entities to deliver the desired end – i.e., a “sustainable, equitable, and democratic form” of public services and their delivery.

Dr. McKinley is an independent writer, researcher and lecturer as well as political activist.

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Rory Short
19 Feb

It should be clear to, even the most simple minded, that any activity that produces a product that nobody wants is a futile and wasteful activity. Now that nobody wants the product could be because people genuinely have no need for the product or, on the other hand, it could be that the price of it is too high for them.even though they need it.

Genuinely private businesses have to recognise the above facts of life and behave accordingly or they will simply go out of business.

The problem with State owned enterprises is that they can often operate as though the above reality does not apply to them. This is because they are often the sole supplier of a needed good or service into the community and should what they are doing not prove to be economically effective rather than changing what they are doing they can and do call for support from the tax-payer. SAA is a case in point.

This does not mean that we should not go down the road of state owned enterprises but having them does present the State with the very great difficulty of operating them in an economically efficient way without the assistance of the harsh discipline of the market. Historically most States, including ourselves, seem to fail to meet this challenge.

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