Do the right thing
BHP Billiton’s 2012 annual report boasts that over the last 10 years it has returned approximately $54bn to shareholders through dividends and share buy-backs. Little did South African consumers know that they’ve been subsidising those shareholder payouts.
Just a day after Eskom urged South Africans to curb their electricity usage by 10% to avoid blackouts, Beeld reported that SA households were paying more than six times the amount paid for power by BHP Billiton, which consumes roughly 9% of the nation’s electricity supply.
BHP Billiton pays Eskom just 22.65 cents per kilowatt hour (kWh) for the electricity that runs its two loss-making smelters in Richards Bay and Maputo, according to the report, which followed a court order ratified by the Supreme Court of Appeal in which the mining giant was forced to disclose the terms of a deal struck with Government as far back as 1992. By contrast South African households are charged R1.40/ kWh for electricity that Eskom produces at a cost of 41 cents/kWh.
The most galling thing about this revelation, which BHP Billiton’s lawyers tried to block, is that the subsidisation of these two loss-making smelters by SA households has largely benefited shareholders in Britain and Australia.
The mining giant’s annual report shows that 86.75% of the shareholders of BHP Billiton Plc, the UK registered company with listings in London, New York and Johannesburg, are British, with just 6.49% hailing from SA and 1.45% from Australia. Australian domiciled BHP Billiton Ltd is 96.14% Aussie-owned with a further 2.38% of shareholders from New Zealand. Instead of being forced to absorb the costs of its loss-making Southern African smelters, these shareholders have benefited from t wo decades of subsidies milked from the South African public.
The revelation comes at a time when SA households have paid average annual power tariff increases of 24.5% since 2009/2010 and are faced with further increases of 8% per annum for each of the next f ive years (and that only after the National Energy Regulator rejected Eskom’s initial request for increases of 16%).
Of course, it must be remembered that the deal between Eskom and BHP Billiton was struck t wo years before the advent of democracy in SA, a time when the country was actually mothballing power stations due to an over-supply of generating capacity. So while the revelation that Eskom has been supplying BHP Billiton with power at prices below its current market value is galling, what the architects of the deal are mostly guilty of is not foreseeing the effect that democracy would have on SA’s economy.
Nevertheless, circumstances have changed. On the face of it one would assume that BHP Billiton would be quite within its rights to demand that Eskom