Price Regulation Study: briefing

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
28 May 2003
PRICE REGULATION STUDY: BRIEFING BY DEPARTMENT

Chairperson: Mr B Martins

Relevant document:
Department of Public Enterprises Presentation

SUMMARY
Representatives from the Department of Public Enterprises briefed the Committee on a study that they had embarked upon to investigate the pricing mechanism of public goods which were in the mandate of the Department. Cross-subsidisation from one sector to another had been suggested as a way in which prices could be regulated.

MINUTES
Dr Mzaliya of the Department of Public Enterprises (DPE) explained to the Committee that the study was not complete and that input was needed from the Committee. Mr S Dlamini, Deputy Director, delivered the attached presentation to the Committee. He explained that a study was being done on pricing of public goods. An example had been made of electricity since Eskom had made its presentation to the Portfolio Committee. The study follows public outcry about prices and concerns that were raised at the budget vote. Dr Mzaliya said that the government had a dilemma as they had set up the regulators and were also shareholders in the state owned enterprises (SOEs) yet it had to regulate it.

Discussion
Mr C Frolick (UDM) congratulated the DPE for taking the initiative in doing the study. He asked what time they were on and what the different stages in the study were.

Mr Dlamini said that he could not be precise about a time frame, but he hoped it could be completed in 12 months. He added that other stakeholders would be engaged once the report was near completion.

Dr J Benjamin (ANC) wanted to know whose rationale was being referred to on page 7 of the document handed out.

Mr Dlamini said that it was the DPE's rationale that was being referred to.

Mr R Heine (DA) remarked that SOEs had the monopoly in the area in which they operate. He said that more competition was needed and referred to the telecommunications industry in the USA. He added that cross-subsidisation was difficult as some industries obtain special rates from Eskom. He suggested that SOEs should operate as a business units.

Mr L Montana, Chief Director in the DPE, said that government has been dealing with these issues and referred to the restructuring of Telkom and the plans to introduce a second operator. These changes however had to accompanied by regulation. Most SOEs were performing well. Industries could not complain about cross-subsidisation as Eskom does make concessions. Everybody must have access to electricity and industry must help achieve this goal. Subsidies, however, had to be done in a transparent way. Dr Mzaliya said that South Africa could not be compared with the US. South Africa has had a history of monopolies that has to be recognised. He pointed out that regulators would not yet be engaged in the study as they were the ones who were the "enemy".

The meeting was adjourned.