POWER DILEMMA

A fine bal­anc­ing act is not al­ways fine enough for Eskom’s stake­hold­ers

The Star Early Edition - - BUSINESS REPORT - Dr Bald­win Ngubane Dr Bald­win Ngubane is Eskom chair­per­son.

SOUTH Africa has been treated to the dire state of in­debt­ed­ness of the mu­nic­i­pal­i­ties to Eskom; the cost of sales be­ing cat­a­stroph­i­cally elu­sive to the ob­vi­ous detri­ment to the coun­try’s es­tab­lished goals. Mu­nic­i­pal­i­ties owe Eskom an amount of ap­prox­i­mately R10.2 bil­lion, which is cur­rently over­due. This amount con­trib­utes about 42 per­cent to Eskom’s to­tal sales and 41 per­cent of Eskom’s rev­enue an­nu­ally. Jux­ta­pose this stag­ger­ing pic­ture against the global whims and you get a cor­ro­sive fu­ture tra­jec­tory for Eskom, if this ar­rear amount is not rolled back.

In De­cem­ber 2016, the rat­ing agencies down­graded Eskom to the sig­nif­i­cant un­cer­tainty re­gard­ing cash flows and tar­iff due to the Reg­u­la­tory Clear­ing Ac­count court case, among other rea­sons. Our liq­uid­ity po­si­tion has sim­i­larly been down­graded. By virtue of its en­vi­able lo­ca­tion in the so­cio-eco­nomic life of South Africa, Eskom is a walk­ing af­flicted ju­ris­tic per­son owing to the emo­tions and in­ter­ests it evokes with each stride.

While we are im­pelled to keep a keen eye on the global in­vestor com­mu­nity, we have to en­sure that we don’t lose sight of our eco­nomic pro­file, as a coun­try, and all its in­nate per­mu­ta­tions. Our chal­lenges tran­scend those who need elec­tric­ity to launch them­selves out of poverty to a bet­ter life, to the up­per-crust, whose headache is to wrong-foot other cap­tains of in­dus­try else­where in the world.

A fine-bal­anc­ing act isn’t al­ways fine enough to guar­an­tee safe land­ing for all our stake­hold­ers. Un­like most or­gan­i­sa­tions that are able to qui­etly wres­tle with their chal­lenges, Eskom misses that bliss as what­ever im­pact is felt by the com­pany bears on the cit­i­zenry.

This point was made dur­ing the un­for­tu­nate load shed­ding sea­son, which, thanks to the South Africans and Eskom’s turn­around strat­egy, we were able to oblit­er­ate. It was an out­size chal­lenge re­quir­ing col­lec­tive com­bat!

Back to the R10.2bn ar­rear amount! Since the com­mence­ment of the Pro­mo­tion of Ad­min­is­tra­tive Jus­tice Act process, we have seen com­mend­able co-op­er­a­tion among stake­hold­ers; we have been re­ceiv­ing part pay­ments and sign­ing pay­ment agree­ments. Need­less to men­tion the fact that Eskom is a na­tional as­set which vir­tu­ally rests on the shoul­ders of each cit­i­zen. There­fore, its sus­tain­abil­ity equally rests on the con­tri­bu­tion by the na­tion’s cit­i­zenry.

Eskom has not rested on its lau­rels in the face of the mount­ing debt. It en­gaged all rel­e­vant stake­hold­ers, sought to en­tice mu­nic­i­pal­i­ties through a “car­rot” of sup­pressed in­ter­est on the over­due amount. Fur­ther, while rel­e­vant laws and agree­ments per­mit us to ap­ply 100 per­cent elec­tric­ity with­drawal against the non-pay­ing mu­nic­i­pal­ity, we opted for a softer ap­proach of in­ter­rup­tions for a few pre-an­nounced hours daily.

Judge Hans Fabri­cius of the North Gaut­eng High Court agreed with us, when he dis­missed the Afrifo­rum’s ap­pli­ca­tion that Eskom had con­sulted widely, over an ex­tended pe­riod of time. Em­pathis­ing with our in­ter­rup­tions, as op­posed to to­tal elec­tric­ity with­drawal, he urged that Eskom’s po­si­tion must be con­sid­ered within the con­text of the broader econ­omy.

In­ter­rup­tions stem from our duty of care; a re­spon­si­bil­ity grounded in our acute ap­pre­ci­a­tion of South Africa and, par­tic­u­larly, its con­tra­dic­tory pro­file. We have to care! Our past eggs us on to care, so that we can even­tu­ally suc­ceed in rec­on­cil­ing our past and the fu­ture.

But one fact is in­escapable. Eskom’s abil­ity to sup­ply elec­tric­ity will be ren­dered ob­so­lete if non-pay­ment, by mu­nic­i­pal­i­ties es­ca­lates.

This will make in­sol­vency in­evitable, which will in turn ex­ert a huge cost on the gov­ern­ment and, by de­sign, the cit­i­zens. It is a vi­cious cir­cle we can tai­lor to a good story, as a na­tion. I urge all the de­fault­ing mu­nic­i­pal­i­ties to ex­pe­di­tiously hon­our their out­stand­ing amounts as a con­tri­bu­tion to the cre­ation of a sus­tain­able fu­ture for South Africa.

PHOTO: AN­TOINE DE RAS

Eskom’s abil­ity to sup­ply elec­tric­ity will be ren­dered ob­so­lete if non-pay­ment by mu­nici­plal­i­ties es­ca­lates.

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