What’s tripping Eskom’s switch?
WOES: NON-PAYMENT, MISMANAGEMENT, GRAFT... The longer govt dithers over decisions, the bigger problems become.
Eskom has a litany of financial and operational problems. In 2017 the Goldman Sachs Group declared the stateowned power utility the biggest risk to the South African economy. Several Cabinet members have said so too – President Cyril Ramaphosa declared that Eskom is “too big to fail”.
The first huge problem is debt of R488 billion, of which, R350 billion is guaranteed by government. Sales volumes declined by 4.7% between 2009 and 2019, based on data in Eskom Annual Integrated Reports. Operational costs also increased by 30% in five years.
The energy availability factor – what’s available from power stations – has declined by about 20% over the past 20 years as Eskom struggles to repair and maintain its previously neglected and ageing fleet of power stations.
This has resulted in increasing load shedding, which is damaging investor sentiment.
The utility also has environmental problems – emissions exceed permitted levels.
Another problem is the culture of non-payment. Eskom sells about half of its power to municipalities and the balance directly to customers. Malfeasance and mismanagement have damaged many municipalities.
In 2019/20, municipalities owed 71.7% of what they’d been invoiced. An anti-apartheid electricity payment strike by Soweto residents has continued through 25 years of democracy. Despite Eskom’s recently more aggressive approach to debt collection, it had R38 billion in receivables outstanding in June 2020.
There are a few possible solutions. Either taxpayers or electricity customers, or a combination, will have to pay Eskom’s debt. There has also been loose talk of using funds from the Unemployment Insurance Fund and the Government Employees Pension Fund but no plan has emerged.
The longer government dithers over this decision, the bigger the problem becomes. Whatever the decision, there will be pain for customers or taxpayers. Crompton is adjunct professor: African Energy Leadership Centre Wits Business School, University of Witwatersrand.
– The Conversation