Roadblocks circle Cyril’s Eskom plan
President Cyril Ramaphosa’s plan to split Eskom is a positive show of intent to investors but a lack of detail has raised market concerns that concrete change will take years to deliver.
Eskom, which employs 48 000 people, is drowning in $31 billion (R423 billion) of debt.
In his State of the Nation address (Sona), Ramaphosa said that to avert an economic crisis, Eskom’s generation, transmission and distribution businesses would become separate entities.
Crucially, he added that the newly created units would remain under an Eskom holding company, meaning its inefficient and unwieldy monopoly would remain.
The president also said another Eskom bailout would be laid out in the budget later this month.
What markets were hoping for was the creation of three independent companies that could more easily cut costs, raise finance and be partially privatised in the future.
“The risk is, very little will change in this structure,” said Peter Attard Montalto at Intellidex.
“The intention may well be to have this as a first step and then separate out after that from the umbrella. However, we think the market underestimates how complex this separation process will be,” he added, forecasting it could take two years.
May election
Even if Ramaphosa intends eventually to create independent units that could be partly sold off, he will face fierce resistance from left-wing elements of the ANC and unions.
The two largest unions at Eskom, who say they account for half of its workforce, said yesterday they would fight Ramaphosa’s plan, with one calling it a “war”.
In the short term, Ramaphosa will need to raise Eskom’s revenues and cut its debt if he is to delay inevitable job cuts until after the election. That means tariff increases and bailouts that are toxic with voters.
‘Proxy war’
A task team formed by Ramaphosa to create a reform programme for Eskom recommended more market-friendly policies than were announced. However, a backlash from left-wing members of his Cabinet saw the plans diluted, an ANC source said.
“Ramaphosa’s opponents will be obstructing him every step of the way with his plan for Eskom,” said Darias Jonker at Eurasia Group. “This is yet another proxy war involving entrenched interests linked to the Zuma faction in the ANC.” – Reuters
Moneyweb
President Cyril Ramaphosa’s State of the Nation address (Sona) provides some reasons to be optimistic. Great speeches don’t change a country’s moral trajectory, especially when the rot of corruption is as deep as in South Africa.
But listening to Ramaphosa list the things he has achieved since addressing the nation last year, it’s evident that a lot has happened under his watch.
In his speech, he tackled key challenges facing SA head-on, offering some tangible solutions. My main highlights were:
The creation of a new Scorpions-like unit within the National Prosecuting Authority to fight corruption. The key is the commitment to give the unit the resources and mandate to prosecute without fear or favour;