SA unveils next steps to rescue Eskom

Plans include increasing competition and lowering fuel costs.
The government unveils the first leg of plans to rescue Eskom, but more details are expected on Wednesday, when Finance Minister Tito Mboweni delivers his mid-term budget speech. Image: Moneyweb

South Africa unveiled its long-awaited plan to save the debt-stricken state power utility, including exposing it to greater competition, lowering fuel costs and increasing renewable-energy output.

A policy paper released by Public Enterprises Minister Pravin Gordhan on Tuesday envisions Eskom relinquishing its almost century-old near-monopoly of the electricity industry. As a first step, its transmission unit will be hived off while remaining under the control of a state holding company, a move that will make it easier for private generators to supply the national grid.

Read: SA aims to complete Eskom split around 2022

Rand extends decline as SA unveils Eskom rescue plan

Eskom, which supplies about 95% of South Africa’s power and owes R450 billion is considered the biggest risk to the national economy. While the government has allocated the utility R128 billion in bailouts over the next three years, that won’t be enough to stabilise its finances because it isn’t generating enough income to cover its interest payments and operating costs.

Finance Minister Tito Mboweni is expected to outline broad principles for tackling Eskom’s debt when he delivers his mid-term budget on Wednesday, with more detail to be provided next week. The issue wasn’t covered in the policy paper.

Read: SA set for a cliff-hanger budget presentation

A new chief executive officer for Eskom will also be announced next week, as will an interim board for the transmission unit, Gordhan said. The utility has been without a permanent CEO since Phakamani Hadebe quit in July and the post has been temporarily filled by its chairman, Jabu Mabuza.

Read: Solar, wind find favour in SA’s new energy blueprint

Eskom will look to cut its cost of coal and diesel and is trying to renegotiate contracts it concluded with independent suppliers of renewable energy with the aim of getting them to lower their prices, according to the policy paper. The utility is also looking at how it can utilise coal plants that are set to be decommissioned for other purposes, possibly battery storage, so they don’t have to be shut down completely, it said.

© 2019 Bloomberg L.P.

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I can’t really say that I am moist with excitement over these ‘Steps’.

A much firmer hand is needed.

Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, and make the tax payers pay for the government (ANC) looting the Eskom purse.Haven’t seen any jail terms yet. HERE COMES MOODY’S

I suppose job security for the 13,000 employees they don’t need is the most important thing!

These clowns are merely shuffling the deck chairs on the Titanic specifically trying to keep their goals fairly vague and open-ended. Here are just three tips: (1) Get rid of the 30,000 unnecessary employees who are just there to buy votes for the ANC. They don’t generate 1MW more of electricity (2) Get tough on municipalities like Soweto who don’t pay for electricity and get non-payers off the system. (3) Appoint some people with real skills at Eskom – even if they are white.

At least the Titanic’s lights stayed on till the end…

I don’t think that the average citizen understands how much trouble Eskom is in. Eskom needs to generate money but with ailing stations, incompetent staff and municipalities not paying their way, they aren’t able to do that. The solution here is quite simple. The government need to get rid of the politics here and implement some tough decisions. They need to cut off non-paying municipalities (as this culture is growing), they need to drastically reduce staff and employ competent and experienced people and they need to get rid of the cadre deployees who are making millions off deals that are bankrupting Eskom (coal being trucked in to stations versus mines conveying). Unfortunately though, this press conference shows that the ruling party still can’t do what is right for the country and risk losing staying in power. So we’re all going down with the ship.

I agree…

Only problem is they will face massive backlash by cutting off non paying municipalities, reduction in staff or discussions thereof will result in Unions striking which will disrupt our economy further.

Reality is Eskom needs to write off debt from non-paying municipalities as reality is that it will never be repaid and will in fact continue to increase if we carry on this way, instead i would suggest mandatory changes to prepaid electricity meters and offering a subsidy to low income areas or low usage households…at least that way if there is no electricity in a household then the blame cannot be laid at Eskom door for cutting power.

It will seemingly still just be ESKOM.

Create a few other divisions (or is it diversions) say you compete with yourself and voila. Moody’s, the unions and the population eat out of your hand.

No mention of getting rid of a bloated workforce or forcing non payers to pay (including Municipalities). That shows no political will to resolve the problems in a business like fashion.

We have to be in the gutter before they realize a political solution will not suffice.

Well this sounds like a great policy paper delivered by the wide eyed and wide awake ANC government. So if Eskom can squeeze their suppliers and renegotiated agreements can not the general public and business renegotiate their electricity suppliers excessive pass – through costs
No mention of those who just don’t bother to pay their dues – we seem to be extending the culture of non payment rather than arresting it – look out SARS you could end up in the same boat as Eskom

Sounds like a good first step if implemented with vigor.

Instead of prescribed assets allow pension funds to invest directly in generation companies.

Allow suburbs to connect directly to Eskom distribution. They have enough people to support this.

“A tale of kicking for touch”-written, produced and directed by the Zupta CFO Pravin Gordhhan.

No substance, no real ideas and no hope!!

*cough* bulldust *cough*

Eskom is a proxy for socialism. No socialist project can be profitable because the two basic requirements for profitability are non-existent. Socialism does not incentivise performance and accountability, and because the resources are shared, the calculation of return on assets, or profitability, is absent. Socialism has a calculation problem and an incentive problem. That is why it fails, without failure.

This is also the reason for our record-high, and rising, levels of unemployment. Under the labour laws that allow labour unions to break the law, there are no incentives to be productive, and the cost does not reflect the supply and demand structure. This results in an unproductive workforce and rising unemployment.

Our economy lacks the driving forces of incentives and price signals. This leads to declining electricity usage, a shrinking economy, a shrinking tax base, rising unemployment and increasing anarchy.

This entire disaster was planned and manufactured by the ANC.

Planning disaster is the only planning they know!

One singular plan that they focus on: Staying in power which in turn guarantees their salary for doing nothing other than toeing the party line. Where else could they earn such exorbitant remuneration?

You could say this is the Dunning-Kruger effect in action (look it up kerels!)?

You really are like that little dog that messes on my lawn every morning. A lovely sentient being that merely does what nature tells it to do, nothing personal, no insults intended, merely pure animal instinct. What you do on other people lawns does however reflect on you, you know.

Dunning-Kruger effect confirmed!

Sensie; you speaketh wisdom at an ideological level. But is just the doctrine of socialism enough explanation for how the ANC have destroyed Eskom (and SA?) running up huge debts in the process?

Methinks not, socialism is just part of the excuse. Real reason is simpler and more venal I believe. Follow the money. Eskom is just an example of the looted state, looted for the self serving interests of the ANC elite, not dissimilar to how elite communists looted the Soviet state on its disintegration, just more destructive.

So these “plans” are just a smokescreen for the looting to continue. We didn’t struggle to be poor.

cANCer are SPINELESS / NO BACKBONE / RUGGRAATLOOS

Just ring fence Eskom from the ravages of transformation. It is too critical for the economy.

They just don’t get it, do they, and these are the results of the indoctrination of the ANC’s socialist culture, no business acumen and commercial sense whatsoever!! Bloated, inefficient, unproductive, unskilled workforce and bad debt’s, a simple start to the process!!

No word on unbundling distribution?

I get that it will be tough in rural, but is not sensible that we have a situation where Eskom is distributor to clients that are located within large well run municipal urban areas.

A council like CPT can take over and maintain Eskom Dsitribution assets within its urban zones (and a lot of the edge too)

We are heading for a situation where the big Metros’ largest competitor will be cross-subsidized Eskom Distribution. Move your factory 2km and suddenly you get 35% cheaper energy?

Margin from energy supply is essential to council budgets. If they face competition there, they will (1) try and increase tariffs on captive energy users – you and me (2) increase other income such as rates and taxes – you and me.

Pretty soon we will be in situation where an upper middle class house (say R4m) will have a fixed bill for rates & taxes & sewerage & kVA supply of R10k per month BEFORE they use a drop of water or a kWh of energy.

A laughable and tragic but predictable response from people who know absolutely nothing and too timid to do what they have been told is the way to go.

This solution n is just way too slow to produce any meaningful results and reduce Eskom debt and get reliable powder supply to their users.

All Anc and Eskom need to do is follow the comments on Moneyweb to get a fantastic and acceptably rapid solution to their self made problems.

And they do not have to pay a cent for this advice.

Whahahaaaa.

You break the power stations up into clusters to compete with each other.

Have you ever heard a more stupid statement.

This was from a grown man.

Whahhaaahahaaaaa.

If your comment is serious not really. Sell the power stations to different entities; no BEE or AA smokescreens to enrich the already filthy rich ANC and let them tender to municipalities and companies to sell their power; various times and futures. No one unit can supply all of SA so there is plenty more to be bought and sold. Based on the US Spark Spread system. Ivo Vegter wrote an article on it some time ago.

Shame real proof that this lot have never run anything more than their pocket money. I am sure the month was too long for that too.

why don’t they ask a successful business man to give them a few tips.

Years ago the Nats asked Derek Keeys to be finance minister. At least he had credentials.

The ANC is considered the biggest risk to the national economy.

Ramaphosa referred to Medupi & Kusile power stations as SA’s Crown Jewels – I think he meant SA’s Clown Joules !

John Major, ex prime minister of Britain, referred to Brexit and said:

“Whenever there is a conflict of interest between the country and the party – the country ALWAYS takes preference.”

In SA the ANC has consistently put it’s own interests before that of the country.

End of comments.

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