Today the power utility is a financial disaster with significantly more debt, more employee costs, and higher cost to produce electricity.
Eskom has been transformed from a strong and competitive power giant into the single biggest threat to the nation’s future, Democratic Alliance leader Mmusi Maimane said on Saturday.
In a statement issued after the DA’s final federal executive (FedEx) two-day meeting for this year, Maimane said that while former ANC president Jacob Zuma promised over two years ago, in May 2016, that there would “never be load shedding again”, this promise could never be kept without any fundamental and structural change to both Eskom and the energy sector. Today, even with a new president at the helm, it was the same ANC that governed.
“Nothing has fundamentally changed. We are still stuck with the same ANC in government, trying the same tried, tested, and failed solutions to the same structural problems in our economy. For the past decade, the ANC in government has repeatedly put band-aids onto the bullet wounds in our energy sector – most notably at Eskom. And the result today is a national power utility that is on its knees, threatening to take the entire country down with it,” he said.
“The Eskom meltdown is not a new phenomenon that can be conveniently blamed on the Guptas. Rather, due to deliberate decisions or lack thereof by the ANC over the past 12 years, Eskom has been transformed from a strong and competitive power giant into the single biggest threat to our nation’s future. Corruption, cadre deployment, mismanagement of coal contracts, and a decision not to invest in coal-plus mines are the key contributors to today’s crisis.”
From the mid 2000s, the culture of ANC capture inevitably crept into the state-owned entity, and its downward spiral was set in motion. Industry experts were replaced with loyal ANC cadres, the board was packed with “yes” men and women, and planning for long-term sustainability was neglected in favour of shortcuts that made connected cadres rich, Maimane said.
A consideration of key indicators painted a grim picture of the abuse and neglect of an entity that had the ability to single-handedly cripple the economy and the nation.
In 2006, Moody’s credit rating for Eskom was “A1”. Today Eskom was rated as “B2” – a below investment grade rating. In 2006, Eskom’s total debt totalled R30.1 billion. Today, it had increased tenfold and sat at over R380 billion. There were plans to take on R212 billion more debt over the next four years from R388 billion to an unprecedented R600 billion
In 2006, Eskom made a total profit of R4.5 billion per annum. In 2018, the utility made a loss of R2.3 billion. In 2006, Eskom’s cost per kilowatt was R14.25. In 2018, that had quadrupled to R63.40 per kilowatt. And in 2006, Eskom’s employee costs were R7.6 billion. Today it had too quadrupled to R29.4 billion
“Today Eskom is a financial disaster with significantly more debt, more employee costs, higher cost to produce electricity – all while making an annual financial loss. This illustrates a failed entity that’s downward spiral is compounding at an alarming rate. Eskom is the quintessential story of the ANC’s modus operandi: governance and decision making that favours the politically connected few over the majority of South Africans,” Maimane said.
“It must be emphasised that as deputy president of SA from 2014, [President] Cyril Ramaphosa was privy to – and participated in – many decisions that led us to this parlous state we’re in today. I today challenge Mr Ramaphosa to come clean, accept responsibility for this crisis, and provide leadership on his plan to save Eskom and reform the country’s energy sector.”
Solutions to the crisis included breaking down Eskom’s monopoly over electricity at national government level to fix the electricity crisis in the short-, medium-, and long-term. Currently the role of local government was simply being a distributor for the national utility’s electricity, and as Eskom had no energy, this had to change. SA cities should be allowed to open the market for energy where both cities and their residents could have greater choice over how they purchased and consumed energy.
In the medium-term, the most suitable way to fix the nation’s electricity crisis was to end Eskom’s monopoly by splitting Eskom into separate power production and distribution businesses, while simultaneously allowing cities to purchase directly from independent power producers (IPPs). It went without saying that the only way to keep the cost of electricity down for consumers was to introduce competition in the electricity market.
“Without immediate intervention at Eskom our nation’s future lies at risk. We must act at once to ensure future generations do not say to us that we failed to act when the writing was on the wall,” Maimane said.
– African News Agency (ANA)