ESKOM CEO admits to ESKOM failure and considers Unbundling!

It is no secret that ESKOM is in a state that seems almost beyond rescue, just another failure in the concert of State Owned Enterprises.Borrowing money to mainly financing debt, SAA and ESKO are both sad examples for the inability of the current government to govern those enterprises but instead being very much in favour to continue ransacking the state coffers in favour of two elephants that are not able to walk on their own anymore.

The umptieth CEO of ESKOM, Phakami Hadebe, addressing the delegates at the Mining Indaba yesterday, seems the first one though, who admits to reality. Nobody wants to lend money to ESKOM anymore, the coal suppliers hold the utility at ransom, procurement is corrupted beyond comprehension and the administration, head-heavy, polluted with nepotistic appointments. What sounds like a quick overview over the current government and its cabinet unfortunately filters down to all public enterprises in South Africa, but those are the main organs of the now limping and once able body South Africa.

Countless times we have at this place asked for radical measures, one of such now apparently moving into the focus of Hadebe. He finally publicly recognises that the government and current management of ESKOM have made grave mistakes in the past and are not able to operate the utility within the parameters of an orderly power provider and is also technically bankrupt. The recently borrowed ZAR 15bn for coal supplies will be most likely diverted to service debts and in the end load shedding returns. Hadebe is therefore mislead when he states that: “Yes, South Africans have a reason to complain about Eskom’s problems, but if government is willing to recapitalise us, we could make Eskom sustainable”. No, Mr. Hadebe, ESKOM has shown over and over that they are NOT ABLE to operate in a sustainable manner.

When the ANC took over the reigns of the country the electricity price in South Africa was one of the lowest in the world and South Africa was proudly supplying its neighbours with the power they needed as most of them were financially unable to build enough power stations on their own. Today the electricity price is the second highest within BRICS and the third highest within all emerging markets. This said, allowing further electricity price increases is not the right way as it cannot be the public, who pays the price for the government failure and mismanagement.

The answer – as stated before – can only be found in the unbundling of the utility giant and to sell parts to experienced international operators. While electricity generation is always regarded as the core, the fiscal disaster around Medupi and Kusile might show that the government is not able to build power plants anymore, especially when comparing their efforts with the progress and results in all renewable energy plants that have in the meantime been built and are in operation through international bidders that won their PPAs within the REIPPPP.

From that experience Hafebe rightfully concluded that it is also important to engage with other countries in order to ensure that Eskom can survive for another 95 years and it was positive to learn that the power utility is, therefore, indeed talking to about seven other Africa countries in this regard. Hadebe further said coal will be part of these dealings, in our opinion the right way if he was to include European and American companies in his deliberations; the xenophobic reins as passed through the administrative ranks by the ANC will soon enough see to avoiding this though.

In summary, Hadebe has touched on the very essence of ESKOM, which is a good sign if he can hold on to this before getting axed. He also admits the failures in the past and is even sounding convincing when stating: “Of course those who did wrong at Eskom in the past must pay the price, but that is for the law enforcement agencies to deal with. We at Eskom must now focus on moving forward.” But with all due respect, that is lip-service only as we all know that those culprits within government will never answer for their wrongdoings!

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