You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

For how long shall we endure Eskom’s failure?

If Sona is anything to go by, it’ll be a long time.
SA is in for a rough five years. The electricity situation is likely to force companies to restructure, induce unemployment, and worsen inequality. Image: Waldo Swiegers, Bloomberg

President Cyril Ramaphosa announced last week in his State of the Nation Address (Sona) that expanding energy generation capacity is one of the priorities of his administration, as entailed in the Economic Reconstruction and Recovery Plan (ERRP).

Insofar as those in charge of the government are concerned, Eskom is an important economic actor that is subordinate to the state. This means the power utility enjoys a significant amount of protection and will continue to do so for as long as it remains a state-owned enterprise (SOE).

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

For example, the president emphasises Eskom’s relevance to the ERRP; in other words, it is seen as of strategic importance, thus warranting a restoration of its financial wellbeing. In his Sona, Ramaphosa detailed at length the steps and measures taken to ensure the efficiency and sustainability of the entity.

The next five years

However, he admitted that despite the measures taken (that is, pouring money and resources into Eskom ) load shedding is going to be part of our business, work and social aspect for the foreseeable future.

For in the Sona, Ramaphosa conceded that unless Eskom’s power generating capacity is increased, there will be an electricity supply shortage in the next five years.

While there is no reason to downplay the impact of such a scenario on the economy, the same goes for the labour market, unemployment and inequality.

Not only will electricity supply shortage force companies to restructure their operations, it will also induce unemployment and worsen inequality.

One important question that remains is how can the president stand before the nation and proclaim that Eskom is making “substantial progress with its intensive maintenance and operational excellence programmes to improve the reliability” when load shedding has been a routine occurrence since the beginning of the year?

This raises another question: for how long will the state protect Eskom and other failing SOEs, and can the primacy of politics over the economic reality of that which is shaped by market and market relations continue?

The ANC – one can even say the Tripartite Alliance (the ANC, the Congress of South African Trade Unions and the South African Communist Party) – assumes, at least from an economic nationalist perspective, that it is important for the state to play a significant role in defining the policy that subordinates economic activity to political aspirations.

One great difficulty with this outlook is that the world economy is not waiting for South Africa to sort out its power-generating crisis – companies move on and look to other countries where their operations are not continuously interrupted by power cuts.

Moreover, what new investor would be willing to risk their capital and resources on a country that cannot keep the lights on?

Under reasonable assumptions, it is a truism that power supply is crucial to a country’s economic activity and that power disruptions have an extensive collateral impact, not just on the fiscus but also on the ordinary citizen.

Risk and irony

Eskom, at least the one that was spoken of in the Sona, does not only pose an energy security risk to the country but also dims any chance of economic development that will bear egalitarian fruits for the people.

Ironically, the latter remains an aspiration of a ruling party that is determined to maintain the Eskom fiasco.

I shouldn’t complain, but nothing very hopeful was said in the Sona regarding Eskom.

Do not look to the Eskom Social Compact (ESC) signed by the government and its social partners. Nothing will come of it.

We are a country of lekgotlas, commissions of inquiry and their recommendations, task teams, working groups, committees and commitments.

The ESC is splendid diversion of critical attention and scrutiny on Eskom from the financial and operational catastrophe that is unfolding at the power utility.

To believe otherwise, notwithstanding the optimism the president seems to have about Eskom, is to set our collective hearts up for heartbreak.

A somewhat surprising development concerning the electricity supply shortage is the turn towards wind and solar energy. Someone needs to remind our principal that energy transition can be a slow and drawn-out process that can be a constraint to a country seeking to make a quick transition.

Now, with the Nersa-sanctioned 15% tariff increase, the imprudent and unstable Eskom has the green light to increase the price of electricity.

Read: Electricity tariffs to rise 15%

The burden of the tariff will be borne by ordinary South Africans who cannot afford any increase, many of whom are unemployed or have had to take salary cuts due to the effects of the pandemic. It will not be big energy users in the mining industry that will feel the pinch significantly – it is me and you who are going to be paying the ultimate price.

South Africa could well be on the path to rebuilding its economy in this pandemic era that is our current reality. However, the Eskom crisis one of the major hindrances on that path – a depressing scenario.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

AUTHOR PROFILE

COMMENTS   28

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

So the ANC government thinks Eskom is important for the economy.
Wow !Enlightened !
What was the frog boiler doing years ago in the war room ? Reading this article it feels like the last 20 years did not happen.

For how long shall we endure Eskom’s failure?

Simple: As long as the voters continue to support the cANCer.

Does anyone know of a Reliable Solar Installation Company, i need to fitout my parents home. Cannot have them continue to struggle.

I would rather have them pay me half what they use to pay the municipality then reinvest that money for my son’s education.

We are a country of lekgotlas, commissions of inquiry and their recommendations, task teams, working groups, committees and commitments.

Could not have summed it up better !!!

The author forgot to mention the game changing imbizos.

Where would we be without them?

And the favorite ‘ FRAMEWORK’. How apt, a framework is a skeleton without substance.

They use any possible means to burn Tax payer money.

Just goes to show that once Mr. Zuma (The one with the Midas touch) touches anything, it will never recover!

SAA (We can do without), Eskom (Unfortunately we cannot without yet)

Under the previous government, the people stole the eggs which the chicken laid. Today they steal the eggs and slaughter the chicken. That is the difference and the reason why Eskom is on its last legs.

Eskom will faul as long as the ANC are in charge.

They have no option but to shrink the labor force and privatize or at least semi-private.

There is always an option. Eskom is the single biggest monopoly in the country. It is the single biggest cashcow in SA with Coal contracts, Cadre deployment, tenders worth billions, marketplace controls, etc. The ANC will never hand it over. They will channel funds from other parts of the fiscus to keep the heart beating. It might be in critical shape, but as long as there is a glimmer of life in ESKOM the ANC will be making money.

The answer is as long a the government believes Eskom is too big to fail. As a matter of fact: Eskom has already failed. This whole idea of splitting it up in three different state entities, is ill-born. Eskom and the country will only be saved when Eskom and all other loss-making state entities are privatised.

All of the Imbizos; job submits, 10 point plan and and and are Time Buying Tools…

I just pray that the average South Africa wakes up and holds their elected to account.

Sadly, people far to often think because you are not for a political party or its ideas then you are completely against them. More often that not this is not true, their are just better people out there who can do that job right.

So in essence these people would rather vote for the extreme left than find the middle ground.

This is exactly why I decided a year ago to spend the money necessary to install a solar system big enough to go off grid. I call it future proofing myself. It’s become a “everyone for him/herself” scenario. Unfortunately the economy is suffering and will continue to suffer.

“One great difficulty with this outlook is that the world economy is not waiting for South Africa to sort out its power-generating crisis – companies move on and look to other countries where their operations are not continuously interrupted by power cuts.”

can’t put it any better or more straight forward – the pity is that the corrupt and most incompetent government sa ever had + its alliances are simply not capable to understand it or do not want to understand it – one can NOT have all the most unfavorable self created conditions,(economical and politically) in ones country and at the same time think a thick stream of foreign entrepreneurs / investors are going to invest in ones unstable country – dream on. the anc wants to be core of everything in sa and everyting must revolve around themselves as a political party, whilst it actually should be the private sector, made possible by favorable conditions through the government. anc wants to sit on different chairs at the same time, just different hats per chair – current handling of covid 19 is just one example

When talking about the world economy it must be remembered that the United States have had a tariff increase of roughly 1%a year for the last 10 years. We are no longer competitive.

A well-written article saying it as it is. The Madupe and Kusile power stations should have been completed years ago and we shouldn’t have any shortages if they were. The fact remains that the completion date has been overrun by more years now than it was supposed to be completed.

The problem being in part due to incompetent management on the one hand and disruptive labour union action on the other. So whilst Eskom is of strategic importance for the government’s economic recovery plan it still plays second fiddle to placating the unions. Herein lies the conundrum for the country. The cabal needs to fix the economy and to do so they need to fix Eskom but to stay in power they need the support of the unions who are hellbent on destroying the economy.

For those that can afford it, the solution is to go off grid, partially or totally. For those that can’t afford it, the solution is to deploy meter bypass technology. Both scenarios will lead to a further deterioration in Eskom’s revenue, causing the latter to apply for even greater tariff hikes next year. And so the Eskom death spiral continues. The “divide Eskom by three” project is just a scam to make the public believe that something is being done about Eskom. Then we’ll have three CEOs, not one as at present. More jobs for cadres.

We are in for many years of power disruption no matter how much Maintenance is done even with the new CEO making lots of promises. The reality is with our ageing and low efficiency boilers. There is no money to complete our 2 new builds due to design, theft and corruption. This is not enough. Units generally have to be taken for Maintenance or modifications and then other older units have to pick up the slack and then trip resulting us going to Stage 3 and above.
Watched an amazing program called Future Engineering mainly Siemans and GEC on Wind turbines but has taken 25 years to get to where the UK Coal Fired generation is down.

Ye the ANC approves small windows at a time for Wind and Solar. Increase of 15% approved to cover the debt and those that don’t pay. Going off the grid is to expensive, we need power at night during evening peak. Do not have Battery and Technology and money to carry us and that includes Business. Coastal need self generation, need shale gas to fire boilers to generate. Enough Technology to mitigate the Environment.

Oh I in retirement have a gig generator but cost to run. What about the poor that rely on Paraffin.The cost of Crude is on the up.

Off course SAA and the money thrown at it is more valuable than keeping power on for all Business.

Wally Stowe

Retired Oil Refiner.

Die wet van Transvaal. K@k en betaal

Eskom is a symbol of ANC rule. Broken-down, hobbling along, costing regular citizens more and more each year, retarding progress.

The only solution is to put energy generation in the hands of the private sector and of course the government is doing everything possible to prevent that from happening.

Well written and thought provoking. It’s actually quite simple if you cut out the false optimism that government keeps regurgitating each year. The SONAs are quite frankly a non event as nothing constructive comes out of it – except being a PR exercise for the usual lot, who indirectly rub our faces in the mess they created. The ruling party are still holding us financially responsible for the awful mess they made and will do so still many more a year to come. More job losses, more businesses (SMEs) treading water. There’s nothing else to it really. The president and his cronies have nothign to back up their claims with; we will still have power increases af at least double to triple inflation rate. This all whilst still having to be subjected to load shedding…

Superb article and spot on.

How long? As long as the ANC controls the economy. Patently obvious surely? Since they have been in control, I don’t think a single SOE has produced a Rand’s worth of profit.

The real question is: How do you educate an economically illiterate electorate? Perhaps a bit of Voodoo would help.

Eskom and the ANC are running a financial scam – a massive Ponzi scheme that steals from every household and business. Run Eskom into the ground and use tactics like ‘transformation’ to employ some 15 000 surplus staff and then get others to pay for it through an endless series of bail-outs and ridiculous increases. And yet some people criticize the past when the entity supported the economy through a reliable, low-cost service. South Africa is mad.

Looking on the bright side, we should thank our lucky stars that we don’t live in Texas.

Would gladly swop this shytehle for Texas’ problems!

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / PODCASTS SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: