Over the past two days, the Democratic Alliance’s Federal Executive (FedEx) convened for its final sitting of 2018, to discuss and decide on matters of importance to the party and our national programme ahead of the 2019 general election.
Eskom and the electricity crisis
On top of FedEx’s agenda this weekend was South Africa’s persistent and crippling energy crisis, which reared its ugly head again over the past month with the reintroduction of electricity cuts affecting all corners of the country. As the DA, we sympathize with South Africans, whether ordinary consumers or vital players in the economy. The fact is we all suffer when the ANC government fails at basic tenets of governance, and fails to provide a basic need – electricity.
While the ANC’s former president Jacob Zuma promised over two years ago, in May 2016, that there would “never be load shedding again”, this promise could never be kept without any fundamental and structural change to both Eskom and the energy sector. Today, even with a new President at the helm, it is the same ANC that governs.
Nothing has fundamentally changed. We are still stuck with the same ANC in government, trying the same tried, tested and failed solutions to the same structural problems in our economy. For the past decade, the ANC in government has repeatedly put Band-Aids onto the bullet wounds in our energy sector – most notably at Eskom. And the result today is a national power utility that is on its knees, threatening to take the entire country down with it.
The Eskom meltdown is not a new phenomenon that can be conveniently blamed on the Guptas. Rather, due to deliberate decisions or lack thereof by the ANC over the past 12 years, Eskom has been transformed from a strong and competitive power giant, into the single biggest threat to our nation’s future. Corruption, cadre deployment, mismanagement of coal contracts, and a decision not to invest in coal-plus mines are the key contributors to today’s crisis.
From the mid 2000’s, the culture of ANC capture inevitably creeped into the State-Owned Entity – and its downward spiral was set in motion. Industry experts were replaced with loyal ANC cadres, the board was packed with “yes” men and women, and planning for long term sustainability was neglected in favour of shortcuts that made connected cadres rich.
A consideration of key indicators paints a grim picture of the abuse and neglect of an entity that has the ability to single-handedly cripple our economy and our nation. The following figures show Eskom’s decline from 2006 to present.
In 2006, Moody’s credit rating for Eskom was “A1”. Today Eskom is rated as “b2” – a below investment grade rating.
In 2006, Eskom’s total debt totalled R30.1 billion. Today, it has increased tenfold and sits at over R380 billion. There are plans to take on R212 billion more debt over the next four years from R388 billion to an unprecedented R600 billion
In 2006, Eskom made a total profit of R4.5 billion per annum. In 2018, the utility made a loss of R2.3 billion.
In 2006, Eskom’s cost per kilowatt was R14.25. In 2018, that has quadtripled and sits at R63.40 per kilowatt.
And in 2006, Eskom’s employee costs were R7.6 billion. Today it has too quadrupled to R 29.4 billion
Today Eskom is a financial disaster with significantly more debt, more employee costs, higher cost to produce electricity – all while making an annual financial loss. This illustrates a failed entity that’s downward spiralling is compounding at an alarming rate.
Eskom is the quintessential story of the ANC’s modus operandi: governance and decision making that favours the politically connected few over the majority of South Africans.
It must be emphasised that as Deputy President of South Africa from 2014, Cyril Ramaphosa was privy to – and participated in – many decisions that led us to this parlous state we’re in today. In March 2015, Ramaphosa was tasked with appointing a “war room” to oversee Eskom’s fundamental problems, one which appeared to make little change if any to the status quo.
During his spell as Deputy President, Cyril Ramaphosa would have had knowledge of all the board and executive appointments that exacerbated the collapse of Eskom. These include the appointments of Brian Molefe, Anoj Singh and Matshela Koko among others. Moreover, as head of the ANC’s deployment committee since 2012, many of these appointments would have been run past him, or required the green light from him.
As Chairperson of the Inter-Ministerial Committee on State-Owned Enterprises (SOEs) during this period, Ramaphosa would have had knowledge of the appointment of Gupta-friendly individuals to SOE boards – including Eskom - and any “special work" being performed for the Guptas and their associates. To claim ignorance of this is simply not plausible nor believable.
Millions of South Africans are headed for a “Black Christmas” this year reminiscent of the state of emergency era during the last years of the Apartheid regime in the late 1980’s. For many of us, we remember the eerie atmosphere of fear and instability, the smell of burning paraffin, and the long nights of darkness across townships and informal settlements. President Ramaphosa must take responsibility for this “Black Christmas”, as he evidently sat on his hands over the past 6 years, allowing us to arrive at this juncture.
I today challenge Mr Ramaphosa to come clean, accept responsibility for this crisis, and provide leadership on his plan to save Eskom and reform the country’s energy sector.
It is the DA’s view that we need to take the following immediate steps to reform Eskom and the energy sector, to bring about stability for our economy, and to introduce much need competition that lowers the price of electricity for ordinary South Africans.
Short Term Solutions
Breaking down Eskom’s monopoly over electricity at national government is required if we are to fix our electricity crisis in the short, medium and long term. Currently the role of local government is simply being a distributor for our national utility’s electricity - and as Eskom has no energy, this must change.
We urgently need a solution to the current round of the energy crisis and its clear it will not come from the ANC national government. South African cities must be allowed to open the market for energy where both cities and their residents can have greater choice over how they purchase and consume energy.
The City of Cape Town, one of the most established DA governments in the country, has begun legal proceedings in the Western Cape High Court to compel the National Energy Regulator of South Africa (NERSA) to enable the City to feed power produced by independent producers into the grid. This a massive step towards energy security in the City and will mitigate against electricity cuts that hamper the economy, business, and the lives of ordinary citizens.
Given the urgency of the situation I have discussed with Cape Town Mayor Dan Plato the possibly of approaching the Judge President of the Western Cape High Court, seeking to have this declared an urgent matter. A decision on this will be announced by the Mayor in due course.
If successful in this matter, it will set a precedent that upon consideration could be implemented in DA governments across the country,
Medium Term Solutions
In the medium term, the most suitable way to fix or nation’s electricity crisis is to end Eskom’s monopoly by splitting Eskom into separate power production and distribution businesses, while simultaneously allowing cities to purchase directly from Independent Power Producers (IPPs). The DA has a draft Bill - The Independent System and Market Operator Bill or “ISMO Bill” to achieve just that.
It goes without saying that the only way to keep the cost of electricity down for consumers is to introduce competition in the electricity market. Our ISMO Bill aims to achieve this by legislating the creation of an entity that is financially sound; has efficient systems management; acts as an electricity trader; guides electricity supply and transmission planning; is responsible for the integrated power system; and will dispatch within this integrated system.
The Bill envisages the establishment of an independent body owned by the state tasked with buying electricity from electricity generators. The operator will function as a wholesaler of electricity that sells electricity to distributors and customers at a wholesale tariff. ISMO will function independently to electricity generation businesses to ensure fairness between generators, encouraging competition and innovation
A crucial objective of the Bill will be to allow metropolitan municipalities with a proven history of good financial governance and electricity reticulation management to trade with electricity generators directly, buying electricity straight from the source. In the spirit of accountability, the processes involved with such procurement will be required to be transparent, and any agreement concluded will be required to be the result of a competitive bidding process. Metropolitan municipalities that have shown themselves to be capable of good governance will be allowed to manage their energy requirements without being dictated to by national or provincial government.
This is a major boost for consumers, businesses and entrepreneurs in South Africa’s major cities, which aligns with the DA’s “city-led growth” agenda. We will be formally introducing this Bill to Parliament at the beginning of next year and have already begun canvassing MPs from all political parties to support this.
Without immediate intervention at Eskom, our nation’s future lies at risk. We must act at once to ensure future generations do not say to us that we failed to act when the writing was on the wall.