Poll pol­i­tics leaves Eskom flick­er­ing

Business Day - - NATIONAL - Lisa Steyn

Eskom is on the brink. Its fi­nances and op­er­a­tions are in ut­ter dis­ar­ray and “load-shed­ding” is again com­mon­place in the SA vo­cab­u­lary.

Now a sus­tain­abil­ity task team has been ur­gently brought in by Pres­i­dent Cyril Ramaphosa to tackle the deep­en­ing cri­sis at the power util­ity. SA has long been warned that fix­ing Eskom will be a painful process. Costs have to be cut, and jobs too. A re­struc­tur­ing and pri­vati­sa­tion of some kind must be con­sid­ered if it is to stay afloat.

This is an elec­tion year, and one in which the ANC is con­cerned about los­ing votes. If re­form­ing Eskom ap­peared po­lit­i­cally im­pos­si­ble be­fore, just try it now.

“It’s tech­ni­cally fea­si­ble to an­nounce a per­fect plan from the task team be­fore the elec­tions,” Peter At­tard Mon­talto, head of cap­i­tal mar­kets re­search at In­tel­lidex, says. “But the re­al­ity of course is that this is po­lit­i­cally im­pos­si­ble,” he adds.

Darias Jonker, po­lit­i­cal an­a­lyst at po­lit­i­cal risk con­sul­tancy Eura­sia Group, agrees.

“There are po­lit­i­cal lead­ers who can fathom the com­plex­ity, but to make the de­ci­sion that is po­lit­i­cally pos­si­ble is much more tough.”

De­spite the util­ity’s wors­en­ing sit­u­a­tion and the ma­jor risk its fail­ure poses to the econ­omy, Eskom man­age­ment and the gov­ern­ment have stopped short of tak­ing the dras­tic steps that are needed to turn it around.

Eskom has many woes. Its costs are ris­ing but it is also sell­ing less and less power every year. It faces im­mense re­sis­tance to every tar­iff in­crease ap­pli­ca­tion and is never granted the in­creases it claims are needed to cover costs. In­come from op­er­a­tions falls short of the cost just to ser­vice debt.

Fix­ing Eskom would in­volve as­set re­struc­tur­ing, spin­ning bits off, and 16,000 job losses with a “mas­sive union back­lash”, says At­tard Mon­talto.

Jonker notes the unions are “dis­pro­por­tion­ately in­flu­en­tial”.

The in­flu­ence of the unions came into sharp fo­cus in mid2018 when Eskom man­age­ment opened wage talks with a 0% of­fer, only for pub­lic en­ter­prises min­is­ter Pravin Gord­han to step in. The util­ity ul­ti­mately set­tled on a 7.5% wage in­crease for the year but ad­mit­ted it has no idea how it will fund this.

In De­cem­ber, Eskom an­nounced it had com­pleted a re­trench­ment process among the high­est level of ex­ec­u­tives. But ac­cord­ing to a Bloomberg re­port, plans are in place to ex­tend this to lower-rank­ing man­agers and then the gen­eral work­force, although the util­ity has not con­firmed the re­ports.

Labour has said work­ers are un­will­ing to pay the price for wide­spread mis­man­age­ment and cor­rup­tion at the util­ity. It is also quick to re­mind the ANC of the lev­er­age it wields.

“Our mem­bers have made it clear if Eskom con­tin­ues to re­trench work­ers, they are not go­ing to vote for the ANC,” says Livhuwani Mamm­buru, spokesper­son for the Na­tional Union of Minework­ers (NUM). “There is no ques­tion about it, they still love the ANC. But if Eskom re­trenches, they will mo­bilise the whole of Mpumalanga, in­clud­ing their fam­i­lies, not to vote for them.” Mpumalanga is where the ma­jor­ity of af­fected power sta­tions are lo­cated.

NUM also re­mains ve­he­mently op­posed to pri­vati­sa­tion of any kind, Mamm­buru says, adding the union hopes the new task team will seek its in­puts.

At­tard Mon­talto and Jonker think it is pos­si­ble to kick the Eskom can still fur­ther down the road. Jonker says that re­form can be de­layed for even an­other year or two, as long as the gov­ern­ment can con­jure up fi­nan­cial so­lu­tions to cover Eskom’s rev­enue short­falls on a year-toyear ba­sis.

At­tard Mon­talto agrees that tid­ing the cri­sis over is “just a fund­ing is­sue”. But there will be load-shed­ding.

Although power cuts will be un­pop­u­lar in the lead-up to the elec­tions, weak­nesses in the op­po­si­tion and a softer petrol price mean the ANC has some mar­gin for risk, Jonker says.

At­tard Mon­talto says ev­i­dence of the past five years shows clearly a pref­er­ence for load-shed­ding rather than tak­ing the nec­es­sary ac­tion.

“But if even the cor­rect steps were taken to­mor­row, the low en­ergy avail­abil­ity fac­tor prob­lems [a re­sult of poor power plant per­for­mance] would still take some time to turn around,” he says.

“So why have the ad­di­tional headache be­fore an elec­tion?”

LABOUR HAS SAID WORK­ERS ARE UN­WILL­ING TO PAY THE PRICE FOR MIS­MAN­AGE­MENT

/Mark Wes­sels/Sun­day Times

Struc­tural ad­just­ment: Eskom’s na­tional grid of py­lons car­ry­ing the coun­try’s elec­tric­ity hum at sun­set near Melk­bosstrand, 35km from Cape Town.

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