Time for Ramaphosa to bite the bullet on Eskom

When President Cyril Ramaphosa delivers the state of the nation address next week he might sound like a stuck record by once more focusing on finding solutions to the Eskom crisis.

In his 2022 Sona, Ramaphosa went into detail on how his government planned to fix Eskom. Ramaphosa delivered the 2022 Sona after the electricity utility had plunged the country into 48 days of load shedding in the previous year, according to data from EskomSePush.

This year’s speech will be delivered after the country had experienced 157 days of load shedding in 2022, the worst in history. In the first month of this year, the country has already experienced 30 days of load shedding.

Eskom was established in 1922 to provide cheap electricity to South African residents and businesses. As the sole electricity supplier, Eskom became a thriving business that attracted skilled personnel, while also upskilling its workers.

The utility played a major role in the industrialisation of SA, powering factories and urban areas. However, large parts of where black people lived were not electrified due to apartheid.

Post 1994, electricity was extended to many black communities, resulting in most of the country being electrified. However, as the demand outstripped supply, the government ignored calls to ramp up generation and transmission. This eventually led to load shedding, which has haunted the country for much of the past 15 years.

The economy has been underperforming, with companies folding and jobs shed.

When penning his speech, Ramaphosa might recall that a few years before load shedding, the economy was doing fairly well, with annual growth rates reaching just over 5% in a good year. There was so much hope in the air, with a number of companies dishing out performance bonuses more than once in a financial year.

Now it’s a total opposite and it will take sorting out the power crisis to recover.

The president should consider these few suggestions to turn Eskom around:

● Put a 6% cap on all Eskom contracts as well as on electricity tariffs

● Develop internal capacity that would be responsible for fixing boilers. It makes no financial sense to be pay out R16bn for a contract to fix boilers when the company is highly indebted;

● List Eskom on the JSE, selling 49% of its stake to private and institutional investors and;

Deregulate the power generation and transmission sector, paving a way for new entrants to enter the industry to compete head-on with Eskom and stabilise electricity supply.

Listing Eskom on the JSE, would help to recapitalise the company.

With Eskom on the JSE, government will remain the majority shareholder, ensuring that the state-owned enterprise continues to drive its agenda of economic transformation and industrialisation.

Failure to privatise Eskom will cost the economy more jobs and deal a blow to the fiscus. SA will ultimately find it difficult to recover from this mess and will eventually lose its competitiveness and the spectre of becoming a failed state will be real.