State capture cannot shoulder all the blame for Eskom’s woes
Eskom unveiled its results for the 2020-21 financial year just over a week ago, posting a whopping loss of R18.9-billion. After the announcement, economists and energy experts said the parastatal had shown progress by paying off R81.9-billion of its debt and reducing it by 16.9% to R401.8-billion, but needed to move faster to curb soaring energy costs, fix middleman corruption and cut its bloated staff complement, which struggling consumers were effectively subsidising.
The ever-floundering state-owned enterprise, which could sink the South African economy with it, has been beset with issues for years; now, more recently the Covid-19 pandemic landed another haymaker. Its recovery will remain hamstrung by electricity constraints, among other factors, as the state power utility lurches on with a creaking system and financial woes.
For years, the government has baulked at the idea of privatisation as a solution for the beleaguered
entity, but it is fast running out of options — and financial resources — to keep getting it out of trouble.
Eskom provides about 95% of the country’s electricity and, thus, cannot be allowed to fail.
The National Energy Regulator of South Africa has approved a 15.06% Eskom tariff hike for 2022 and the power utility’s chief financial officer, Calib Cassim, said a “cost-reflective” tariff, often used by Eskom bosses as a pseudonym for double-digit hikes, would be needed in the next few years, as Lyse Comins reported in the Mail & Guardian last week.
Analysts warn that the latest tariff hike, coming amid a declining electricity-demand trajectory that has been ongoing for more than 13 years, was both “unsustainable” and “unconstitutional”, given low wage increases and a legal provision limiting parastatals’ ability to hike prices above the inflation rate.
In October 2019, Public Enterprises Minister Pravin Gordhan said that, in addition to the billions of rands lost through the wide-scale project that captured the state, Eskom lost a lot of skills.
But he added an important caveat: “You can’t blame so-called state capture for everything … There were other areas, for example, the design of Medupi and Kusile.”
He was right. Not all the blame for tariff increases and load-shedding can be attributed to state capture. The powers-that-be have hardly made sound business decisions in the past decade or more.
Whereas mismanagement of funds is certainly an issue that negatively affects Eskom, we should not make the mistake of thinking that it is the only problem. There’s been a dearth of fresh ideas and solid decisionmaking at Eskom. Unfortunately, until something changes, consumers will continue to bear the brunt of Eskom’s perilous finances.
Kiri Rupiah & Luke Feltham write The Ampersand newsletter for subscribers. Go to mg.co.za to sign up for the best local and international journalism handpicked and in your inbox every weekday