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Hello and welcome to the So What podcast, in which political economic analyst JP Landman

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discusses the issues uppermost in the minds of South Africans. You can find a written

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version of this content on JP's website, jplandman.co.za. I am Ruda Landman and I am your host.

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These first few recordings were done at our dining room table, but we will soon be moving

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into a studio. Hello, this is an audio recording that goes

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with my note for March, dated 31 March 2023, with the heading, Electricity Distribution,

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a glimpse of what the future could be. My sense is that South Africans are utterly

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exhausted, and so to give us all a break, I have decided this month to do something

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different. I am not going to quote data and research, we are going to tell you a real

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life story, coming from the ground up, which I think is also telling us something about

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the future. It is a story of a father, a mother, the two sons, the Bosch family, who have developed

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a very practical example of how electricity distribution in South Africa will change over

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the next few years, and Ruda will tell us the story of the family.

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The story starts 30 years ago, when the engineer father started working on the maintenance

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and administration of electricity distribution systems, as ESCOM was embarking on its mass

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electrification programme of 350,000 houses a year. ESCOM made losses on these programmes,

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and then it outsourced the management of these to private companies.

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The father in our story began a family business, contracting his services to ESCOM in Hammans

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Crown, north of Pretoria. The losses were turned around, and the services became profitable.

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Why? What was the secret of their success? Well, firstly, they involved local communities.

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No, not local politicians, their real local community. The Chabin, funeral parlour owners,

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the taxi bosses and spaza shop owners, block by block, those who were leaders in that area,

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a chief or a chief son, a church leader or a community organiser, anyone of stature or

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credibility was contacted, brought into the circle. These community members received nothing,

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and all they were asked to do was to support the delivery of electricity services in their

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community. Secondly, the company rendered the service. If the power went out, they got

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there and fixed it, no matter the time of day. The mother told us that one night in

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the early 90s, the couple's eldest son, who was a mere baby, was sleeping in the bucky,

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while she was holding a searchlight for dad, who was up on a pole in Hammans Crown, to

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attend to an electricity outage. Four men walked up with AK-47s. Remember, this was

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the early 90s. It was still quasi civil war back then. She dropped a light, introduced

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herself to the four men, shook their hands and explained that they were busy fixing the

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power. The four guys laughed, wished them well and went on their way. The power was

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restored. The result of community buy-in and service delivery was that households paid

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for their power. Safety of equipment was minimal, and company vehicles weren't stolen or hijacked.

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Well, not quite true. One brand new Nissan bucky was stolen before it had company signage

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on it. Word went out, the bucky was recovered. As one door closed, another one opened. When

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demands for a cut emerged in 1998, the family didn't renew their Scom contract and moved

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on to private sector work. They managed the distribution of electricity for a bank across

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all its retail properties. Later, they did the same for a large property company. It

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was before the days of REITs. It proved to be a very successful enterprise, saving the

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bank and the landlords many millions. It proved there was legitimate money to be made in the

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administration and management of electricity distribution. That is the opportunity the

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family saw and exploited, so much so that their company was sold for a tidy sum of money.

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They then had the option to emigrate Australia, New Zealand, or they could put the money into

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electricity distribution infrastructure in the Free State. They chose the latter, helping

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local government. They made a very promising start in the Free State in Mafube, a municipality

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covering Frankfurt, Cornelia, Falise and Tueling in the North Eastern Free State. Mafube municipality

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had to pay an average of five million rand a month to Scom. They had an average income

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of only 1.7 million rand a month. Metres were not installed or repaired and in numerous

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cases simply bypassed or just partially billed. There was no money for petrol or diesel to

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go out and attend to problems and there was no capital for replacement parts or equipment.

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So Mafube municipality contracted the family business to take over electricity distribution

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in the four small towns. About 100 million rand was invested in infrastructure. Staff

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were trained and retrained to the desired standards. YouTube, they say, helped a lot.

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And custom-made technology was deployed. Long story short, there are 12,000 clients, households

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and businesses, and only 65 have been cut off over 12 years for non-payment and the

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subsequent debt written off. Let's say that again. Out of 12,000 clients, only 65 were

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cut off over 12 years. Javier, it sounds as if the principle is actually quite simple.

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If people receive effective services and are treated decently, they pay for the service,

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yeah? Yes, absolutely. That's exactly what it is. And take a step back, Rudan, just think

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about the basics. Who is going to do the distribution of electricity better? A specialized company

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that focuses only on that and nothing else, or a municipality which must deal with political

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patronage, with conflicting priorities and a whole different set of issues. It's quite

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clear that the specialized company focusing on distributions will actually do it better.

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They will train the people better. They will focus on controlling the debtors. They will

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focus on getting the cash in. And they will focus on giving a good service because their

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lifeblood depends on it. No service, no income. It's as simple as that. Now, one can say that

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the municipality, in theory, can do it as well. Yes, in theory they can. But in practice,

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we know that most do not. How has this played out in Mafube? Well, for Mafube, the story

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has really gone very, very well. The municipality no longer has the outflow that they used to

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have with providing electricity. In fact, they're now receiving a royalty from the Bosch

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family. The Bosch family is using the municipality's license, distribution license, and they pay

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a small royalty in that. So there's an income for the municipality. They no longer have

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to worry about that side of life. They can carry on with providing other services to

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the community. And what has happened in the economy of the town is simply unreal. They've

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organized the distribution of electricity in such a way that the waterworks and the

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sanitation works are not cut off when there is national load shedding. Those operations

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carry on. So water and sanitation delivery is automatically better. Because there's a

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small solar farm also in the operation, they save about 17% of what is required by ESCOM

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when there's load shedding. They can do 17% less load shedding. A big agricultural co-op

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in the town, you know, that's rural area, it's all about agriculture. A big agricultural

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co-op has decided as a result of the reliability of electricity to invest more in the town

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and they've created 120 jobs. Property prices are rising in the towns of Mafube in comparison

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to other towns and small businesses flourishing. So it has been a really a good new story.

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Because a late friend of ours would have said, what is not alike? Have the Bosch's expanded

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to neighboring towns? Yes, they did to Harris-Smith, which is in the Eastern Free State. That story

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didn't end too well, because as happened many years earlier, there was again a demand for

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a cut and they then decided they're not dealing with that. So they withdrew from the town.

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And the result is that Harris-Smith today is the biggest single debtor of ESCOM that

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exists while Mafube owes no money to ESCOM. What is also interesting is that the ANC in

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the 2021 local government elections lost control of Harris-Smith to a local organization, but

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in Mafube they retained control of the council. So there is political advantage in doing proper

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servicing. Future plans, I know that the family is constantly planning new stuff. Yes, yes,

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they can't sit still. They have to always try new things. What they're working on at the moment is

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two rather large solar farms to supply more electricity to town and buy less from ESCOM.

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What is unique about that is they want to actually over time sell the shareholding in those two solar

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farms to the electricity consumers of Mafube. So if you pay your electricity bill for a month,

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say 100 rand, then you have the option to pay 105 or 110 rand and that extra five or 10 rand

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will go towards buying shares in the two solar plants. And this is not just the big farms and

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the industries, it's also private people that they want to pull in like this. Absolutely. Remember

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that's where they started. From the beginning they involved the local community, they involve the

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local citizens and this is an extension of that principle. They now want to take these people who

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are consumers of electricity, even if they're a small consumer of electricity, and convert them

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into owners. So from consumers to being owners. In fact they are looking at the moment and if any of

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our listeners or readers can help, please contact us. They're looking for a company that gives a

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specialized service in administering the collection of three rand here, five rand there, six rand there,

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which then goes towards buying shares in the solar farm. So if there's anybody out there who knows

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about a company doing that, please please help out. Your conclusions? So what? Well I think the first

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point is that electricity distribution doesn't have to be a drain on the Fiskus. That is very

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very clear. It was a drain in Mafube, it is a drain in many other municipalities. The way that the

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the Bosch family is doing this, it doesn't have to be a drain. With proper management, new technology,

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proper communication with the community, you can actually turn it around into a profitable enterprise

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which benefits everybody, also the local municipality and politicians.

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What we also clearly see is that a localized operator with roots in the town, with links to

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the community, free from political interference, can actually get rid of corruption in electricity

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distribution, of which we know there is a lot, run a clean service and give a proper service to the

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town. That is clearly the second lesson that has come out. I think the biggest lesson of all is

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citizens are willing to pay for electricity. They're willing to pay for services. If you treat them

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decently, you give a proper service 24 hours a day, seven days a week, people will step up and

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and take that responsibility and pay for it. The story that South Africans don't want to pay for

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services, it is certainly not generally applicable. I think that's an important point to

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make. But then you must be willing to put a ladder against a pole at 9.30 in the evening,

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with your baby in the car. Absolutely, even if people walk around with rifles or guns,

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that's what you have to do and it has worked. That is very, very clear. The other point that I think

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comes out clearly is that when you involve a private company in distribution, that company

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will put up the capital for a proper system, for enough spare parts, for enough equipment,

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like proper meter readers and so on and so forth. The family has spent a hundred million rand

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in Mafube. That's a lot of money coming from a private company. If they could have spent a hundred

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million rand, the municipality would have had to cough the capital. Now it's no longer necessary.

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You take the money from a private sector and then you allow them to enter the turn on that money.

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I think the last point that I want to make is that at the moment all our attention is focused on

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load shedding. I don't have to tell you every day, all day, that is uppermost in people's minds.

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But the next area of problem will be electricity distribution. This model that we have here is a

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pointer of how it can be organized, how it can be done. It is not necessary to walk blind into a new

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crisis. It can be managed. Thank you very much. You started. You said hello, so you must say goodbye.

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Thank you for your time. Thank you for listening and we wish you a very happy Easter time.

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