For the national government to act like the current Eskom mess somehow happened suddenly overnight is a farce. The warning bells have been rung loudly for the last 10 years but it was ignored. And now the situation with Eskom is potentially catastrophic.
Let’s not beat around the bush. In short, Eskom’s 45 500MW power plants can only supply about 25 000MW of power. And Eskom is technically bankrupt with R420 billion in debt and an annual projected loss of R20 billion.
President Cyril Ramaphosa has no choice but to draw a line in the sand until the national budget is announced and that will be very unpopular. If he doesn’t do it then there won’t be enough generators in the world to save us. So what can be done?
Eskom has run out of money and from April 1 will be insolvent if the state does not give a bailout. So, in the short term, that will and must happen. The amount will be about R100 billion. The risk is that within 18 months, Eskom could be back in the same hole again. Therefore, this bailout must go with some strong action by the president. A bailout before March 31 is non-negotiable.
2. Take on the unions
Ramaphosa must be prepared to take decisive action against the unions threatening to disrupt Eskom. From 2007 to 2018, Eskom staff numbers went from 32 000 to 48 000 people. Staff costs went from R9.5 billion per year to R29.5 billion. And despite that, today we’re told Eskom is struggling to keep the lights on because of the poor quality of maintenance and poor workmanship. Forty percent of plant breakdowns are due to human error. Action must be taken at Eskom in terms of staff and the unions need to come on board.
Did you know that over the years, the Medupi power station build has been delayed by at least one whole year due to labour unrest? That excludes last year’s fun and games when, due to the financial challenges Eskom was facing, it offered workers a 0% wage increase. Workers went on a rampage, causing damage to power stations and dumping truckloads of coal at power station gates.
This all led to load shedding over three days in June 2018. Eskom revised the offer and made one it could not afford, a 7.5% increase for 2018 and 7% for 2019 and 2020. Workers also got a R10 000 bonus 48 hours after the deal was struck. Now, once again, unions are threatening to strike. If the president doesn’t come down hard on the first sign of protest action that is illegal then we can kiss the economy goodbye.
3. Rampant debt
The president must take action against the rampant debt at municipal level and in Soweto. Soweto owes Eskom R17 billion – as much as all the municipalities combined – and has never been cut off like rural councils. An example must be made and people who can afford to pay for electricity must do so. Will this be done before the election? There’s surely no choice in the matter?
4. Middlemen – Diesel and coal
The continued running of the diesel turbines over the short term is critical for power stability.
Yet it appears that Eskom still has no direct contract with the wholesale suppliers of diesel like Chevron. Instead, the power utility has hundreds of middlemen and women who own these contracts in the name of empowerment. This is now a real risk to security of supply since Eskom has run out of diesel in the past week due to supply challenges. It is also more expensive and procurement issues are a major problem. I understand a roll of single ply toilet paper at Koeberg nuclear power station costs Eskom R40.
The same goes for coal. One major reason the new multi-billion rand power plants are struggling with providing power is the rubbish coal they are being sold. Eskom is still literally buying trucks of stones from smaller suppliers for Kusile power station and chucking them into the new turbines. Again, this is a procurement matter that needs an urgent look.
5. Speed up the audit of the generators and skills
New Eskom CEO Phakamani Hadebe has decided it is now time to do an in-depth audit to establish the condition of Eskom’s power generation units (about 135 of them). What has he been doing since May 2018? Surely the very first thing one does when taking over a struggling utility with old plants and increased concerns about reliability is to establish the condition the plants are in? Now, Hadebe says that not only does Eskom apparently not know the state of all these units, it will take another three months before it does. This must simply happen faster and the money to fix the challenges that crop up must be made available.
Did you know that not a single member of the current Eskom board and current Eskom executive committee has any experience at all with generation of electricity? Not one. And it is in generation where the problem currently lies. How many engineers and people with experience does Eskom have left? We need to know this.
Over the long term I’m afraid there’s more bad news. The simple fact is that Eskom is currently building ZERO new power stations beyond Medupi and Kusile. The country already has a dire lack of power. In addition, over the next 11 years to 2030 Eskom is expected to decommission 14500MW of its existing power plant. The country is also in desperate need of economic growth which needs electricity. But where will it come from? Eskom isn’t building.
So, what will President Cyril Ramaphosa do? We wait beside our candles with bated breath.
James-Brent Styan authored a book on the energy crisis called Blackout, The Eskom Crisis, published in 2015. He writes in his personal capacity.