honour its deal, which only terminates in 2028. However, from a political standpoint, it would be wise for both Eskom and BHP Billiton to at least consider an early termination of the contract.
No one can deny the massive challenges that Eskom faces. The State-run power utility requires an estimated R1tr to meet its goal of almost doubling SA’s powergenerating capacity to 80 000MW by 2026. However, to expect consumers to bear the brunt of that burden is both unsustainable and unjustifiable.
Eskom’s outgoing f inancial director Paul O’Flaherty told Finweek in May last year t hat t he average overall t ariff charged to all its customers would have to increase by 48% (before factoring in inf lation) just to complete its current build programme, which terminates when the Kusile power station comes on stream in 2017. Expansions planned beyond Kusile until 2030 will require additional tariff increases roughly 81% higher than those that prevail today (again, before taking i nf l ation i nto account).
SA already has a somewhat precarious culture of payment for public services and this is likely to come under further stress thanks to rising municipal tariffs and accelerating inf lation. If Eskom wants to preserve what limited culture exists for the payment of public services, it is going to have to give serious thought as to how it goes about persuading BHP Billiton to relinquish its legal right to preferential tariffs.
Spokespeople for Eskom and BHP Billiton did not answer their office or mobile phones when Finweek tried to reach them for comment on this story.