Tackling Eskom’s woes is key to addressing South Africa’s ills
The decades-long indecision on its restructuring is a classic case of fiscal neglect
ONE OF THE most effective ways to win a debate between different generations in the township today is to simply label the younger opponent a “Ma2000”, meaning that those born after the year 2000 are still wet behind the ears.
This catchy Kasi lingo sprung to my mind this week as speculation mounted that the ANC-led government would finally announce the break-up of cash burning power utility Eskom into three state-owned enterprises responsible for generation, distribution and transmission.
Not many of those who grew up after 2000 will remember the name Penuell Maduna, the erstwhile minister of energy who served in the portfolio from 1996 to 1999.
It was under his leadership that the department drafted the Energy Policy White Paper of 1998, which made a case for the privatisation of Eskom and its split into different units.
The wording of the White Paper was clear; Eskom needed restructuring for it to remain competitive.
“Present restructuring initiatives in the distribution sector, and future plans for restructuring generation; indicate that it has become necessary for Eskom to be restructured as a preparatory step for competition in the electricity supply industry. In the long term Eskom will have to be restructured into separate generation and transmission companies,” read the White Paper.
The White Paper called on the government to separate the power stations into a number of companies.
Maduna’s department argued that such a step would assist in introducing competition in electricity generation and create opportunities for the private sector and Black Economic Empowerment investments in the sector.
The power utility’s transmission grid enjoys a natural monopoly and its generating arm could certainly become a profitable entity – this is where private participation can be key.
The ruling party’s decades-long indecision on the restructuring of Eskom is a classic case of fiscal neglect and sheer incompetence, without taking into account the real matters at stake.
Those who advocate for privatisation point to the success of the renewable energy sector as an example.
The ANC’s alliance partners, and Cosatu in particular, on the other hand, opt for a simplistic view of Eskom’s woes. They want us to believe that Eskom’s commitments such as the agreements signed as part of the independent power producer programme are to blame for the power utility’s near demise.
What is conveniently forgotten is that Eskom’s debt is now well south of R400 billion, making it the black sheep of the sickly state-owned enti- ties family.
By late last year, the debt had become 20 times larger than that of SAA, hitting 8.5 percent of gross domestic product.
Taxpayers have already guaranteed R350bn out of the total debt of R420bn. This is what Ma2000 and their children’s children will be forced to pay for if nothing is done now.
The earlier aborted review of the power utility’s business model, and later the runaway corruption that bled the company, mean that any measures announced by President Cyril Ramaphosa this week will take time to bring the firm back to good health.
Eskom requires billions of rand in investments to replace its ageing coal plants, which are expected to come to the end of their useful lives by 2030.
Ma2000 might well not know the historical background of Eskom’s long walk to restructuring, but they have sure felt its stranglehold on South Africa’s economy, directly and indirectly.
The State of the Nation address is normally an event where the president, as the country’s chief executive, reflects on the socio-economic, and political progress within the domestic and global contexts.
However, no such report is required this year.
The real state of our nation has been laid bare by the revelations in Deputy Chief Justice Raymond Zondo’s Commission of Inquiry into State Capture and other consequential inquiries taking place. What is required is a bold action plan to address the economic headwinds facing the country.
Sorting out Eskom’s perennial problems may be a perfect start, Mr President.