Beyond loadshedding: the critical role of Eskom in SA's economic recovery - Cosatu
Solly Phetoe
The return of loadshedding this weekend is a timely reminder that despite the excellent work in turning Eskom around over the past few years, it remains fragile and needs our collective support if we are to ensure the economy has the reliable and affordable electricity it needs to grow, create jobs and provide the tax revenue public services require to function.
We have seen steady progress over the past two years, where not long ago loadshedding was the norm and we reached the peak of 12 hours a day. The government, led by the ANC, has done well to help Eskom stabilise and rebuild.
The efforts of various Ministers, the management team of Eskom, and most importantly Eskom and municipal employees must be applauded. The fact that the economy has been spared loadshedding for 10 months, leaving aside the short and relatively minor period over the past weekend, is a testimony to their hard work and South Africa’s inherent potential.
However, we dare not be complacent. Eskom remains fragile and an economy struggling with 1% gross domestic product growth and 41.9% unemployment cannot afford to return to the dark days of loadshedding.
While the green shoots of Eskom’s turnaround are inspiring, the danger lights remain as this weekend reminds us.
Many areas continue to be hindered by load reduction. This is particularly problematic for factories and other heavy electricity users who cannot operate under such reductions.
While Eskom did not receive its ill-considered 36% tariff hike, it was granted a 12.7% increase that is still four times the level of inflation and most workers’ salary increases. It comes against the backdrop of increases since 2006, amounting to over 600%!
Eskom is the nation’s most important economic asset. The entire economy depends upon its efficient functioning and ability to generate reliable and affordable electricity. Even businesses and homes that have gone off grid still require society and the economy to have access to electricity supplied by Eskom.
Eskom’s turnaround success has correctly been based upon addressing its maintenance challenges. It now needs support to address its financial and infrastructure crises. The approach of massive double-digit tariff hikes that fail to fix the underlying faultlines are tantamount to pickpocketing consumers at best and at worst they are pushing consumers off grid and thus threatening Eskom’s own sustainability.
Law enforcement must be brought in to help Eskom tackle entrenched criminal activities. These range from supply chain fraud and tenderpreneurs, to private sector collusion supplying low grade coal whilst high grade was purchased, to criminal syndicates stripping copper cables.
Eskom is not the police nor the National Prosecuting Authority, the courts or State Security. These organs of state must play their part and help Eskom to deal with and remove these criminal syndicates that have inflicted so much damage upon the state owned enterprises (SOEs) over many years.
The government did well as proposed by Cosatu, to relieve Eskom of R253 billion of its debt burden. This has helped Eskom shift its resources towards maintenance and thus easing loadshedding.
We must be deeply worried, however, by the rising level of municipal debt owed to Eskom, which has more than doubled over the past few years to R90 billion and is projected to double again in the medium term unless bold action is taken.
Treasury put in place measures to assist municipalities settle their Eskom debt, yet already many are returning to their old non-paying delinquency.
While there is a long overdue need for a municipal funding model, Eskom cannot wait nor continue to be used as to fund to prop up dysfunctional municipalities. Nor can consumers continue to be squeezed with tariff hikes far above inflation.
Eskom cannot be blamed when they are compelled to drag municipalities to settle their debts, especially after they continuously renege on settlement agreements. Some of these municipalities owe billions.
Eskom is also confronted by a crisis of some municipalities allowing their infrastructure to fall into disrepair, yet they decline the SOE’s offers of help to deploy teams to get them running again.
Linked to a new municipal funding model, has to be a shift towards all consumers paying Eskom directly. This will ensure it has the daily cash flow to keep the lights on and undertake the necessary maintenance.
A new municipal funding model needs to compensate municipalities for their electricity infrastructure costs and how they’ve depended upon electricity tariffs to cross-subsidise other municipal functions. But the status quo of rising municipal debt cannot continue.
The second key intervention area needed is on Eskom’s infrastructure.
The government needs to relax its debt relief conditions on Eskom, including its repayment and interest charged to allow it to invest in new generation capacity.
Eskom must be enabled to enter the renewable energy generation space not only as a purchaser but also as an owner. This will help Eskom to lower its generation costs, dependence on Independent Power Producers and also expand the diversity of its generation.
The fundamental reason why we saw a return to loadshedding this weekend is that Eskom’s generation fleet is aging and will continue to struggle as time moves on. Enabling and assisting Eskom to invest in new generation capacity is key to overcoming loadshedding and in fact to positioning South Africa to once again becoming an exporter of surplus electricity to the region and thus helping spur the economies of neighbouring states and reduce the pressures of migration on ourselves.
The 2024 State of the Nation Address made a bold commitment to invest in 14 000 kms of new transmission lines. This will unlock renewable energy generation in the three Cape Provinces and attract badly needed investment and construction jobs. But we need to be worried about the tepid progress in rolling out this infrastructure.
If we want to ensure we do not see the return of loadshedding, to end Eskom’s unsustainable dependence on unsustainable tariff hikes and provide the economy with the reliable and affordable electricity it needs to grow and create decent jobs; then collectively we must do more to support Eskom.
Cosatu General Secretary Solly Phetoe
BUSINESS REPORT