Eskom solutions not easy

Everyone seems to have an opinion on Eskom, as we should. It is a state-owned company that therefore belongs to all South Africans. But the solutions to Eskom’s problems are not easy to get one’s head around. The go-to move of slashing the power utility’s workforce is disrespectful and insensitive in a country with an unemployment rate of about 40%.

Eskom has been suffering with falling demand for years; a weak economy and low industrial demand are not going away; and no amount of unbundling will resolve that.

Its primary energy costs (coal and independent power producers) are moving in the opposite direction to electricity demand. Something has to give, and the ministers of both mineral resources & energy and public enterprises are looking for solutions and cost reductions.

Eskom’s governance is poor, from a CEO with a dual role as chair to a task team with vague goals and no discernible separation of duties between the executive, the board and the shareholder. And somewhere in between all of that sits a restructuring officer and the aforementioned task team.

In another quirk of Eskom governance there has never been a claim from Eskom against the construction companies for collusion ... major builds such as Medupi and Kusile and no mention of collusion?

Fixing Eskom in a sustainable manner is in everyone’s best interests as the utility still has a developmental mandate to fulfil. The independent power producers (IPPs) should be ring-fenced away from Eskom to move them into a costneutral position. The cost-plus mines and most of Eskom’s coal contracts should be reviewed with the aim of Eskom paying a fair market-related price while still pursuing transformation.

Accounting standards that are applicable to IPPs and the cost-plus mines should be reviewed, because the current Eskom financials don’t represent the underlying substance of these transactions.

Kavi Pillay Via e-mail