Question

Why Eskom is an undesirable type of a market structure

Answer 1

Answer:

Explanation:

Eskom is an electricity public utility of South Africa(established in 1923)  run by the Government .

Eskom is an undesirable type of market for the following reasons:

• It is highly incompetent.

• It enjoys a monopolistic hold as it the only electricity supplier in the country which is not considered healthy for the consumer.
• As new entrant are barred in this sector , they charge high prices for electricity from the consumer and often remain unchallenged.
• Absence of any other player makes it unprofessional as a result they hardly make an effort in providing better services to the consumers.
• It is overstaffed with unskilled people which is never desirable situation in long run.
• The influence of Union hinders the growth prospects as any plan undertaken has to be approved by them.
• Municipalities are given the responsibility to collect electricity payments from customers which at times are diverted to other places instead of paying Eskom. This lead to widespread corruption and mismanagement of funds.

• Independent power producers (IPPs) provide wind and solar energy to Eskom which is later supplied to the customer (household, industrial). This is not desirable. The IPPs should be allowed to supply directly to the consumer for the benefit of the consumer.

         

      Hope this helps.

Answer 2

Answer:

Explanation:

Eskom is a south African parastatal that deals with electricity production.

Eskom is an undesirable type of a market structure  due to the following reasons:

1.Presence of rampant corruption in the institution due to mismanagement by its top officials and sue to the absence of a competitor in the South African  electricity sector.

2. Eskom is a monopolistic company ,thus barring any entrepreneur to venture into the sector .

It also charges very high electricity rates since theres  no competitor in the market.

3. Eskom invests in very high inputs which do not refect in the ouputs of the company,for instance,employing a very large number of unproductive staff into the company .