Will the last per­son at Eskom turn off the lights

Weekend Argus (Sunday Edition) - - NEWS - TSHEGO LEPULE

ESKOM’s mount­ing debt cou­pled with de­fault­ing mu­nic­i­pal­i­ties and a dis­pute with unions over wages is threat­en­ing the power util­ity’s vi­a­bil­ity.

Eskom an­nounced it would take at least 30 days for the sys­tem to re­cover, with spo­radic threats of load shed­ding, af­ter an il­le­gal strike by its work­ers.

Eskom an­nounced on Wed­nes­day that it had filed a dis­pute with the Na­tional Union of Minework­ers (NUM), Sol­i­dar­ity and the Na­tional Union of Me­tal­work­ers of South Africa (Numsa) over dis­ci­plinary ac­tion against mem­bers who took part in the strike.

Ques­tions have been raised about how the util­ity plans on sus­tain­ing an added R1 bil­lion wage bill to their trou­bled fi­nances.

Eskom has of­fered a 7.5% salary in­crease for the 2018/2019 pe­riod and 7% for 2019/2020 and 2020/2021.

Ear­lier this week Pub­lic En­ter­prises Min­is­ter Pravin Gor­dan said over the past 10 years, Eskom’s costs and bor­row­ing have in­creased dra­mat­i­cally.

With em­ployee num­bers hav­ing also in­creased from 32 600 em­ploy­ees to 47 000, with a bill that went from R9.4mil­lion to R33m, Gor­dan said the costs of em­ploy­ees have be­come the util­ity’s sec­ond big­gest ex­pense af­ter coal.

Energy ex­pert Chris Yel­land said Eskom sim­ply could not af­ford the in­creased salaries when their sale of elec­tric­ity has de­creased over the past decade.

“Eskom can­not af­ford these wage in­creases. It is go­ing to cost them an ex­tra R1bn a year for this salary in­crease at a time when their rev­enue is de­clin­ing,” he said.

“The de­cline in their sales vol­ume is less than it was 10 years ago. This is be­cause of the dra­matic rise in price of elec­tric­ity and so cus­tomers are us­ing less of their prod­uct and many in­dus­tries are not grow­ing be­cause of the weak econ­omy and many of the energy-in­ten­sive cus­tomers like deep level min­ing and steel are ac­tu­ally run­ning on re­duced time and that is due to mar­ket con­di­tions and high prices of elec­tric­ity which is mak­ing them less com­pet­i­tive.

“Eskom has to break out of this but it is very po­lit­i­cally dif­fi­cult to do so be­cause Eskom does not have a lot of con­tin­gency plans so when the labour force has a strike for one day, the whole coun­try goes into load shed­ding.”

Yel­land also said at the rate that Eskom is bor­row­ing money; its in­abil­ity to pay in­ter­ests on its debt high­lights the fi­nan­cial mess it is in.

“Eskom is bor­row­ing a lot of money, its debt is cur­rently stand­ing at R395bn as of the be­gin­ning of this fi­nan­cial year with pro­jec­tions that it will rise to R600bn in four years,” he added.

“Even at cur­rent debt level, their in­come from op­er­a­tions is not suf­fi­cient to pay their in­ter­est bills for that debt, the in­ter­est bill is eat­ing away all of its in­com­ing from op­er­a­tions.

When you are in a po­si­tion where your op­er­a­tions are un­able to fund your in­ter­est, let alone the cap­i­tal re­pay­ment, then it is not sus­tain­able. Eskom is in fi­nan­cial dif­fi­cul­ties be­cause its debt is too high, it is bor­row­ing money in or­der to pay back debt.”

An­other cri­sis that threat­ens Eskom’s bot­tom line is the ever in­creas­ing mu­nic­i­pal debt. To date Eskom is owed R27bn of which R14bn is over­due.

While Eskom has been grad­u­ally cut­ting power sup­ply to de­fault­ing mu­nic­i­pal­i­ties and try­ing to come up with so­lu­tions to en­sure fu­ture pay­ments, they have been warned against try­ing di­rect supplies, cut­ting out the mu­nic­i­pal­i­ties.

Some­thing Co­op­er­a­tive Gov­er­nance Min­is­ter Zweli Mkhize said would hurt the fi­nances of mu­nic­i­pal­i­ties who de­pend on it for rev­enue.

“It is very dif­fi­cult for Eskom to cut off a mu­nic­i­pal­ity for a num­ber of rea­sons, you have the pay­ing cus­tomers, you have schools, hos­pi­tal and other emer­gency ser­vices and if you cut them off you are hurt­ing es­sen­tial ser­vices and you are hurt­ing the very peo­ple who are pay­ing your bills,” ex­plained Yel­land.

“Mu­nic­i­pal debt is a huge prob­lem and ev­ery year it is grow­ing sig­nif­i­cantly, if you were to look at mu­nic­i­pal debt over the last three years, has grown ex­po­nen­tially and one of the rea­sons for this is that elec­tric­ity is es­sen­tially be­come un­af­ford­able be­cause the price of elec­tric­ity has gone up dra­mat­i­cally.”

Its debt is cur­rently stand­ing at R395 bil­lion

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.