Open AccessIs vertical separation a prerequisite to enhancing competition in the South African energy industry?
Author(s) -
Thembalethu Sithebe,
Tshekishi Kolobe
Publication year - 2014
Publication title -
journal of economic and financial sciences
Language(s) - English
Resource type - Journals
eISSN - 2312-2803
pISSN - 1995-7076
DOI - 10.4102/jef.v7i4.383
Subject(s) - unbundling , competition (biology) , vertical integration , business , separation (statistics) , energy sector , monopoly , industrial organization , electricity , energy (signal processing) , value (mathematics) , economics , market economy , natural resource economics , engineering , ecology , statistics , mathematics , machine learning , computer science , electrical engineering , biology
Vertical separation is believed to have positive effects in energy sectors where certain phases of the value chain operate under a natural monopoly. This paper discusses whether unbundling is necessary in the South African electricity and piped gas sectors to encourage entry and increase competition based on the experiences of other nations. Despite positive results in some instances, unbundling does not always result in higher levels of competition and benefits for consumers. In fact, in some cases, vertical separation has resulted in energy sectors that are worse off.