EISHKOM & HELLKOM - Epic Fails being the Final Nail to the ANC's Coffin?

18 Feb 2019
ESKOM & TELKOM in trouble

Are ESKOM and TELKOM the final two nails that are needed to nail the ANC’s re-election coffins shut?

ESKOM

Everybody had to walk down memory lane with a bitter taste as load shedding returned with a vengeance, reaching level 4, a level of severity not seen for four years and analysts say it has blown up into the biggest political threat facing President Cyril Ramaphosa’s ANC just three months away from elections.

Eskom unexpectedly imposed highly-unpopular power rationing last Sunday, with rotational cuts now scheduled every day – plunging shops, offices, factories and home into darkness for hours. This week the government confirmed that troubled state-owned power utility ESKOM, which generates more than 90% of the country’s energy, was “technically insolvent” as it is buried under a mountain of ZAR 420bn in debt. Unless it receives another cash bailout, it is officially forecast to collapse in latest six weeks.

With national elections on 8 May, the blackouts have shaken the ANC, which has held power since the end of apartheid in 1994. “This is probably the biggest political nightmare for the ANC at the moment,” analyst Daniel Silke told AFP. “The real opposition for the ANC is load shedding more than it is the opposition political parties. The only option for ANC is a Band-Aid. It’s going to have to throw cash at Eskom.”

For many critics of the ANC, the blackouts have come to symbolise the price that the public pays for their corruption and mismanagement. Ramaphosa, who took power after scandal-tainted Jacob Zuma was ousted last year, has tried to draw a line after his predecessor’s reign, but with very limited to no success. If the power cuts persist into the campaign season, plaguing everyday life and suffocating the economy, he could face tricky polls despite the ANC remaining forecast to win the vote.

The Democratic Alliance has jumped at the chance to make gains ahead of the polls: “The future of Eskom is of fundamental importance to every one of us,” it said. “Only one party can put an end to the corruption and mismanagement that has brought South Africa to the edge of the cliff.”

Ramaphosa is widely seen as an electoral asset for the ANC after nine years of Zuma’s rule, and his moderate, pro-business record has boosted investor confidence. The party itself has been keen to pass the blame for the energy crisis, denying responsibility in the fashion of mentally deranged lunatics caught in the act. ANC spokesperson Zizi Kodwa, clearly appointed based on nepotism rather than merits or skills even had the audacity to publicly claim that "… the power blackouts were “an act of sabotage”. That can leave one only speechless…

Eskom’s serious downturn started in 2007 when it began building two new coal stations to replace ageing plants. But instead of trsuting internationally experience companies to provide the plants turn-key, the ANC leadership saw the unique chance of lining tehir pockets with kick-backs by making ASKOm the General Contractor and negotiating – without any experience or skills – the subcontracts. The consequences did show soon as the highly-touted Medupi and Kusile plants “were badly designed and badly constructed and are not performing to optimum levels,” said Public Enterprises Minister Pravin Gordhan, brought in by Ramaphosa to reform South Africa’s state-owned companies.

The plants have suffered huge commissioning delays and nearly six-fold cost overruns, and now suffer regular breakdowns, forcing engineers to ration power. The outages are posted in advance on the internet, to help people to prepare. Restructuring Eskom will not be easy and will face opposition from within the ANC and from trade unions – the party’s traditional allies – who fear privatisation and job losses.

“We would like to advise the ANC, as a ruling party, to desist from taking people’s votes for granted,” the National Union of Mineworkers (NUMSA) said on Thursday. “If the ANC proceeds with the unbundling of Eskom without taking all stakeholders along, it is going to cost the party dearly and unless it keeps the lights on, ANC government will face an angry electorate on May 8.”

“I just had my hair cut, but I can’t have it blow-dried because there is no power,” said physiotherapist Judy Price as she walked out of Tangles hair salon in Johannesburg’s suburb of Rosebank, her hair soaking wet. “I pay huge amounts of tax and my tax gives me no service. You feel let down by your government. How do you re-elect a government that’s not providing for the people?” …these are but just a few voices echoing through South African#s corridors, but let’s not forget the reason for all of this comes the 8th of May!

TELKOM

In another masterpiece of political and here legislative ineptness, the ANC almost succeeded to pass the Electronic Communications Amendment (ECA) Bill, which was created to implement some of the tenets of the national integrated information and communication technology policy published in 2016 through amendments to the existing Electronic Communications Act of 2005.

It would have introduced significant changes to the local telecommunications sector. Despite a number of iterations to incorporate other stakeholder inputs, aspects of the bill remained challenged. Furthermore, the parliamentary portfolio committee on telecommunications and postal services identified issues that needed to be addressed. The bill would not have been passed by Parliament and signed into law before the May 8 elections. This week, Communications Minister Stella Ndabeni-Abrahams withdrew the bill. This came as a relief for some of the market stakeholders, but may be viewed with trepidation by others.

The bill’s general aim was to create a more competitive telecommunications services environment by enhancing competition at the wholesale and retail levels, expediting telecommunications infrastructure build-out and reducing infrastructure duplication, and transforming the sector through broad-based BEE. This could translate into lower prices of retail services, and more and better quality services. The bill proposed a number of changes, which would have a big effect on the telecommunications landscape:

  • Establishment of new information and communication technology sector oversight committees at state level, which could reduce powers vested in independent chapter 9 institutions such as the Independent Communications Authority of SA (Icasa).
  • Enforce infrastructure sharing and reduce duplication of infrastructure through an “open access” principle. This would lead to less expensive and faster network deployment.
  • Allocate high-demand spectrum for 4G/LTE infrastructure deployment to the Wireless Open Access Network (WOAN) and remaining spectrum to private sector operators. This included recommendations for spectrum trading and sharing by operators.
  • Establishment of a WOAN with allocated high-demand spectrum. This would be a wholesale operator.

The bill would not have satisfied all stakeholders as it seeks to introduce a range of market interventions that will create various forms of disruption. Invariably, those entities being disrupted would have been unhappy and would have sought to dilute the negative impact on their businesses.

One of the more contentious proposals of the bill was the WOAN. It would be available for use to all licensed service providers, making it possible for those that could not afford to build their own infrastructure to still offer the “new generation” of services. The WOAN would charge all service providers the same “low” price to use its network. This would result in lower retail prices of services due to lower input costs and greater competition. It would also offer users a greater choice of service providers. However, the business model of the WOAN remains unclear and the few global examples cited – Mexico, Rwanda and Russia – are not similar in implementation, or they had unintended market consequences.

South Africa could have found itself on the bleeding edge of experimentation after spending a lot of money. Conditions imposed on private sector operators, which want to acquire high-demand spectrum, remained onerous. Many of the bill’s proposals are already enshrined in the existing ECA bill of 2005 with amendments. Moreover, at least some of the bill’s objectives can be achieved through other means, which may be faster and less costly.

The withdrawal of the bill provides an opportunity to go through a proper consultative process and address the bill’s shortcomings. This may lead to the revision of the policy itself before developing further legislation. It also provides an opportunity to address convergence of the telecommunications and broadcasting sectors through a single bill, rather than through two different bills, which would be more reflective of the changing world. This would allow for the structuring of a legislative and regulatory framework to build a more converged industry, with a stronger competitive environment to the benefit of users.

The withdrawal of this bill should not prevent Icasa from issuing regulations that can achieve some of the initiatives presented in the bill, nor should it delay the issuing of the much needed 4G spectrum to operators.

But knowing ICASA and reviewing their stances in the past…..well, hope dies last!

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