PRIVATISING OUR ASSETS? ESKOM’S DEBT TO THE NATION
Ramaphosa addresses the issue of loss-making state-owned enterprises
SOUTH Africa has officially entered an era of privatisation where so-called non-performing state-owned assets will be unbundled and sold to private entities who may be more competent at running them.
Institutions such as Eskom, South African Airways which have been bled dry, looted and been at the centre of corruption are currently part of core discussions at the State Capture Commission of Inquiry.
The sale of state assets has been on the cards for a while within the new administration. The era of neo-liberalism has finally hit home and if one thinks there is still something called a “National Democratic Revolution” that is scheduled to bring economic freedom and prosperity to the millions of people in South Africa who live below the poverty line, then one could be forgiven for being naive.
The bottom line is that South Africa is for sale and the developmental objectives that kept the tripartite alliance and organised labour at bay have essentially been thrown out of the window.
In his second State of the Nation Address (Sona), held in Cape Town on Thursday evening, President Cyril Ramaphosa named the following tasks that will underpin everything his presidency tackles this year:
● Accelerate inclusive economic growth and create jobs.
● Improve the education system and develop the skills that we need now and into the future.
● Improve the conditions of life for all South Africans, especially the poor.
● Step up the fight against corruption and state capture.
● Strengthen the capacity of the state to address the needs of the people.
How then will his presidency reach these objectives if it sells off some of its core assets?
There are a number of major drivers that have paved the way for the unbundling of Eskom, which is running at a loss without revenue to meet its escalating costs.
The power utility is facing escalating debt-servicing costs where its primary energy costs are the drivers.
The state-owned company is R390 billion in debt and is set to make another R2bn loss this year because its interest plus capital is making it too expensive to service its debt.
In addition, when Energy Minister Jeff Radebe signed into effect the 27 Independent Power Producers (IPPS) in April last year, it put a significant strain on Eskom’s revenue stream. As it stands, Eskom is unable to generate an earnings before interest tax, depreciation and amortisation of 35% to pay back its debt.
Part of the reason why Eskom cannot pay its debt is that the burden of carrying the cost of the IPPS was passed on to the company.
The IPPS are currently costing Eskom close to R90 million a day and these costs are passed on to consumers, as Ramaphosa in his address called for the poorest of the poor to start paying for their electricity.
In his speech, Ramaphosa said he had established the Presidential Stateowned Enterprises (SOE) Council, which will provide “political oversight and strategic management in order to reform, reposition and revitalise stateowned enterprises, so they play their role as catalysts of economic growth and development”.
In his speech, he commented: “We want our SOES to be fully self-sufficient and be able to fulfil their development and economic role. Where SOES are not able to raise sufficient financing from banks, from capital markets, from development finance institutions or from the fiscus, we will need to explore other mechanisms, such as strategic equity partnerships or selling off non-strategic assets.”
He explained that, in doing this, his government would seek to build a pragmatic and co-operative relationship between the government, organised labour and private sector stakeholders, where all parties can jointly determine a strategic path for SOES to create jobs, enable inclusive growth and become operationally and financially sustainable.
“Security of energy supply is an absolute imperative. Eskom is in crisis and the risks it poses to South Africa are great.
“It could severely damage our economic and social development ambitions. We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay,” explained Ramaphosa.
His speech is set to raise the ire of organised labour which has vowed to fight against the privatisation of state assets by any means necessary.
The prevailing consensus among organised labour unions such as the National Union of Metalworkers of SA (Numsa), National Union of Mineworkers (NUM) and the South African Federation of Trade Unions (Saftu) is that privatising will result in massive job losses. Currently, 15 000 would have to be shed for the utility to cut costs and reach its sales targets. Unions have maintained that unbundling Eskom’s assets would be a declaration of war against the poor.
One of the underlying problems with South Africa’s energy crisis is that there are private sector players that have seen an opportunity and are looking to make a profit and score big from it, even if it means steering away from the ANC’S developmental policy positions.
As entities operating in a developmental state, Eskom and the rest of the SOES were not about profiteering but were established to ensure industrial security.
With the de-industrialisation of the mining, manufacturing and means of production it has enabled private sector players to determine and dictate policy direction which is evident in Ramaphosa’s overzealous investment drive.
This drive should not come at the expense of electricity security.
It is no secret that when private sector players come in the price of electricity will shoot through the roof and this will have an adverse effect on the poor.