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It’s war over Eskom privatisation plans

The unbundling of Eskom announced by Ramaphosa is a declaration of war for trade unions.

President Cyril Ramaphosa in his state of the nation address announced the unbundling of Eskom into three operating units. His brother-in-law Patrice Motsepe has emerged as a potential buyer of the assets likely to come up for sale.

The National Union of Metalworkers of SA (Numsa) says Ramaphosa has confirmed its worst fears: the ANC plans to privatise state-owned enterprises (SOEs), continuing two decades of looting and corruption.

Ramaphosa said Eskom will be broken up into three parts: generation, transmission and distribution. He also confirmed that non-core assets would be sold.

Read: SA to split Eskom in rescue plan – Ramaphosa 

“This is nothing more than privatisation through the back door and we reject it,” says Numsa general secretary Irvin Jim.

“The ANC and its cronies looted and destroyed Eskom and now they have identified privatisation as a convenient way to cover up for more than two decades of rampant mismanagement, looting and corruption. The ANC is punishing workers for its failures. The unbundling of Eskom will result in massive retrenchments and job losses. For the consumer, it will mean that electricity will cost more, and it will be even more inaccessible to the poor and the working class.”

Adil Nchabeleng, energy analyst and head of Transform RSA, says “unbundling” is code for privatisation. Ultimately the plan is to sell each individual power station, and the private sector is cheering this announcement. The result, however, could be massive job losses across the energy supply chain and further price increases for consumers.

Private business wants in

Matshela Koko, former head of generation and once upon a time acting group chief executive at Eskom, says Eskom is caught between a rock and a hard place. “Private business wants in on this deal, and they are saying ‘If you work with us you will get the funding you require.’ Cyril [Ramaphosa] has done a bit of a tap dance. The first step is to unbundle without privatising it, but what follows from that is privatisation.

“The real problem here is the renewable energy contracts, which I refused to sign when I was acting CEO of Eskom because I knew they would bankrupt the company. Now we are talking of unbundling Eskom as a way to solve its massive debt crisis, but this ignores the real problem, which is runaway coal and diesel costs, unaffordable renewable energy contracts, and declining electricity sales.”

A court case brought by the Coal Transporters Forum in Pretoria next month could derail Ramaphosa’s plans. It says the renewable energy contracts were signed by the government without public consultation and will result in massive job losses. Should the state lose this court case, it will kill Ramaphosa’s plans for Eskom.

The drain of renewables

Energy analyst Anthonie Cilliers says renewable energy currently provides 5% of the country’s energy needs but accounts for 23% of its cost. “We signed on to these renewable energy contracts without proper consultation. If South Africans knew they would pay R2.20/kWh for renewable energy while coal-fired energy costs 44c for the same electricity, I think we would have had a very different debate.”

Trade unions say the unbundling of Eskom will not solve the underlying problem of runaway diesel and coal costs, and the crippling cost of signing up renewable energy contracts, which will burden Eskom with additional debt of more than R100 billion by 2022.

Koko says Eskom’s generation business is likely to be split into several packages for eventual sale: Medupi and Kusile, being the newer power stations, will form one generating package; the old coal-fired power stations comprising Camden, Hendrina, Grootvlei, Kriel and Komati, will form another package; the ‘middle-aged’ power stations comprising Duvha, Tutuka, Matimba, Majuba and Lethabo will form another; Koeberg, the sole nuclear power station in the portfolio will be separated from the rest; and the remaining gas and hydro-electric power stations will be separately packaged in preparation for sale.

‘Massive job shedding inevitable’

Says Jim: “Only an Eskom which is completely owned and controlled by the state is the best guarantee for cheap electricity. History has shown us that once the private sector is allowed to step in, prices increase and massive job shedding is inevitable.”

Narius Moloto, president of the National Council of Trade Unions (Nactu), says the privatisation of Eskom must be resisted. “Eskom has been looted by ANC-connected individuals and now we are expected to move past that crime and simply unbundle it – which we know means privatisation. So suddenly, we have private capital coming to the rescue while the people of SA have to pay higher electricity tariffs. We are opposed to this. If anything, the ordinary people of SA must be the owners of Eskom. Remember, it is not the government that owns Eskom but the people of SA.”

Jim says the working class is in for more suffering because Ramaphosa is calling for a tariff increase at Eskom while at the same time demanding it is unbundled. “Last year the same ANC increased general taxes in the form of Vat. This, coupled with increases in the petrol price, will worsen the suffering of the working class majority and the poor.

“We have been calling for a Just Transition from fossil fuels to renewable energy. President Ramaphosa and the ANC have perverted that phrase for their own narrow agenda. They took the decision to privatise a national asset, which is owned by the public, without bothering to consult the most important stakeholder, which is labour and the community at large. The working class is opposed to any privatisation plans of our SOEs, but in particular, Eskom.”

The battle lines have been drawn. The state has officially declared war on the working class, says Jim, and it will be resisted every step of the way.

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You use the term “war” far too casually NUMSA…be careful, you might just get what you threaten!

How about the people who actually PAY, for electricity, decide who supplies them.

It is the most basic element of rational behavior…

Funny how the paying customer (in SA), is treated like a necessary evil, well more like an inconvenient irritation.

We generate (pun intended) more than ninety percent of the tax revenue, we are the only suckers that pay for electricity, water, municipal levies, for out children’s educations, etc, etc – yet we are regularly told to go back to Europe.

There is only ONE sustainable solution – unless you can leave SA now; so do not say you were not forewarned,

– GET OFF THE GRID – COMPLETELY (ASAP).

Iow you become one hundred percent energy independent and permanently disconnect your local town-council (eg get their electricity meters- and supply lines removed).

This spat, between those that have not invented the wheel and those that have not even got as far as a written language, will end in one place only – back in the stone age (where they were found in the century before last).

So better you do it now – before you try to do it when the grid has collapsed and the demand for (eg) solar and/or gas equipment shoots through the roof (as demand soars and supply falls short).

Completely agree on the off grid solution, however, in Cape Town, they now want to register all solar panels, with the intention (I assume) of charging the consumer for the privilege.

I like your thinking… unfortunately for a lot of people it is not an option. They either dont have control of their rooftops or they dont have the means to afford it. This is why its essential that running Eskom should be COMPETENCE and not a job for life because I have the right political connections!

You know Duane, in the past this sort of post would have been quite unacceptable. However, after having seen the new dispensation operate for 25 years, I believe it to be eminently sensible. Yes, we have been warned. Words mean nothing, actions mean everything and we’ve seen the actions of the ANC gangster-state. That’s enough for me, regardless of the BS spouted at SONA

Numsa is too militant and a spoiler. I’m not a fan or AMCU’s president; but in the mining indaba he made some positive suggestions about 4th industrial revolution. Noting positive comes out from NUMSA.

Is there an amount of how must electricity is lost through illegal connections? It should not be rocket science to calculate this.
I think we have lost the war in curbing illegal connections; just like policing and other services. SAD.

A grudge purchase of a generator is now being considered.

@Muks generator is a good option. Batteries + inverters do not survive in our environment.

Irvin Jim, even if Eskom stays a single government owned entity, a lot of jobs will need to be shed (or else the tariffs and tax backed bail outs will keep increasing), and you will fight that toot and nail. So we the public see little difference if it’s privatised or not if your theory of costs increases are correct, except we at least then have hope because there is change, and maybe load shedding will stop at least.

I dont know why they always drum the beat of war, there is a case for privatisation that will benefit sa through effective and efficient runing of the utility more tax revenue to the fiscus,7f telkom was not privatise it would have being dead and forgotten

Certain resources should never be privatised

Energy & water

However in the case of the public versus Eskom and it’s “infantile” management, damed if they do and damed if they don’t

Privatisation of energy and water is already well under way in the form of residential solar PV, solar water heating and JoJo tank installations. This trend will accelerate as households refuse to be held hostage by a kleptocratic state, hostile labour and leeching non-payers.

The generation of energy has been successfully privatised across the globe, distribution can be privatised as well quite successfully it seems.

Transmission should not be privatisied as that has developmental angles as well as strategic elements. It is however interesting to note that transmission may be something that largely falls away as technolodgy moves on, smaller decentralised generation plants seem to be the way things are going.

Water is the same story as above, water infrastructure is the next disaster that is coming to SA and you have that idiot Nomvula mismanaging or stealing every cent meant for water purposes. Private investment in that sector usually translates into efficient projects which run well and make money within the tariff structure available.

So Jim, what is your alternative? Should we plant trees on which money grows?

No mr. Jim, it’s not only the ANC that looted and plundered with impunity. Your workers are just as implicit. Bloated and overpaid work force. Please explain your logic to reconcile massive job losses with increased cost to the consumer? If anything privatization will ensure that competent people get the job done at fair reward, which in turn will save the country billions. The real working class is sick of having to put up with your incompetent, lazy and entitled bunch. The real working class do deserve better.

Over-employment in the SOE’s (part of corruption) has helped make the SOE’s bankrupt.

Labour suffers a sense of entitlement.

And that my friends is why history repeats itself. Here are a few very interesting facts about Eskom. Eskom used to be three separate entities before it merged: generation, transmission and distribution. Yes really. It’s the most efficient organisational structure. It helps to prevent corruption and exploitation of the public.

In the 1970’s Eskom tried several times to push up the price of electricity in order to fund its expansion plans. Although Eskom is “owned by the public”, the public has no control over its management and the public is easily screwed by Eskom. The result was Eskom had to become a profit driven organisation and fund its expansion plans through loans. The efficiency of Eskom increased but also resulted in 6,000 job losses in the 1980s. Post 1994 government control was expanded over Eskom. The result is there for everyone to see.

So history teaches us that Eskom should be split, that it should be managed by commercial managers not connected to government or political parties and that the public should review the performance of Eskom and that commercial funding is needed if plan to keep Eskom honest. Still, South Africa has spent 25 years relearning some simple facts about Eskom, and we still can’t pass the exam.

Very well said! Indeed history repeats itself.

(I cannot see that 3 separate entities will be more efficient than the current single structure. Soon we’ll have 3 “head offices”. Three times the opportunity for corruption as these entities “deal” with each other.)

3 separate structures allows for more transparency and focused investment on a stand alone basis.

There is already 3 separate entities for these business units and that would be needed whether they are vertically integrated of not. You would need less integration which would be a big cost saving.

Quote “Jim: Only an Eskom which is completely owned and controlled by the state is the best guarantee for cheap electricity”

We’ll that does not tie up with the current R419,000,000,000 in Eskom debt.

That is the combined construction cost of almost SEVEN nuclear-powered Nimitz-class aircraft carriers! (at US$ 4,5bn each)

To my fellow S’Africans, let that sink in for a bit….

“The evil that is in the world almost always comes of ignorance, and good intentions may do as much harm as malevolence if they lack understanding.” – Albert Camus

I tend to agree that water, energy etc should not be privatised. However, it’s quite clear from the state of all SOEs that the government cannot run a business. They are too influenced by political appointments and the unions to cut the deadwood and get rid of inefficiency and incompetence. So the only hope for Eskom currently is for them to privatise. They desperately need to cut the number of people employed but the unions went on strike and sabotaged the stations last year.

I will tack onto this that the article only deals with one side of the greed and entitlement coin. My guess is that there is the other side; greed induced by the possibility of an ANC connected cabal owning such a monopoly (or its parts which is largely irrelevant) under the guise of BEE. Hence the posturing from the advisory panel and its resignations with Ramaphosa chums, Motsepe / Radebe et al waiting in the wings. They didn’t “struggle” to be poor and ANC cadre vultures will happily pick SA’s corpse clean for a buck.

Yip, there needs to be a transparent process put in place because if they sell assets on the cheap under the guise of BEE then it’s just a different form of looting.

Load shedding has restarted this weekend. Can we fire the person who made this decision or the saboteur who forced it to happen?

The previous government would have declared Eskom a key enterprise and dealt with the problem.

Jim, king of the cockroaches, remember one day when the unions are dead and buried and you cannot afford the hired help in your house that you may not fire her.

Unions need to be crushed, they will be the death of this country.

What is this idiot Jim talking about??? The poor don’t pay for electricity! Look how much Soweto & other municipalities with low income housing owe! That in itself is a huge part of the problem…..typical Unions…the truth is they are worried about their Union fees that keep the bosses in the lifestyle they have been accustomed to!

The problem is much deeper than union fees. These people are hard communists running with their dogma.

“This is nothing more than privatisation through the back door and we reject it” – unless you got vaseline 😉

This is all part of the ANC re-election campaign.
1. The C team get paid basic income grants to vote ANC.( Cost R250 billion per annum)
2. The B team are employed in government departments( SAPS. SARS, SADF, Eskom etc). Bloated, incompetent , inefficient and overpaid they also vote for the ANC
3. The A team are the BEE fatcats and hoods e.g. Guptas, Surve, Bosasa et6c where there is just so much to steal , and with a corrupt, incompetent and ineffective ANC appointed SAPS and NPA it can go on for now so they too vote for the ANC

This is no democracy-is a kleptocracy buying votes!!

To get a clearer understanding of what is going on at Eskom, do yourself a favour and read this article: https://www.moneyweb.co.za/news/south-africa/the-other-side-of-the-messy-r8bn-medupi-kusile-story/

It is pretty obvious that the whole organisation is rotten to the core. No matter how much money they spend on equipment — and the amount runs into the BILLIONS — it is still not managed or run properly because the rank and file don’t give a cr@p.

So actually the place is vrot all the way through and clearly, the useless cadres who are destroying our infrastructure will have to be replaced.

Jobs shedding will occur. Its inevitable. Doesn’t matter whether Eskom is government or privately owned or if its one, three or twenty entities. Operational costs needs to be reduced. To postpone the inevitable will mean more jobs lost in the future. NO entity should borrow to pay salaries or to service its debt.

“Transform RSA”

Jeez Moneyweb, have some dignity, Transform RSA is a fictional company that is a mouth piece for Koko and his backers. You should not be quoting them or giving them any airtime.

“The real problem here is the renewable energy contracts”

This Ciaran Ryan continues to flout this propaganda from Koko when it is known to be plainly false. Eskom gets a full pass through on these costs from NERSA and it has zero (0) impact on Eskom’s balance sheet. For a journalist to print something like this which is known to be false makes me very suspicious that this guy is either in some sort of coal lobby or allied to Koko/Transform SA.

Very dodgy Moneyweb, you continue to lose credibility in this space.

Eskom has not been destroyed but the stakeholders are working on it. Can someone tell me where the mind-set comes from that companies in trouble (or SOEs run into the ground by the know-it-all that doesn’t ANC) cannot shed staff?

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