The politics of power
Eskom generates about 95% of the electricity used in South Africa and 45% of the electricity used in Africa. It is a behemoth, a parastatal that’s been tasked with providing jobs and boosting the economy. But the irony is that if its proposed 16% tariff h
Small and medium-sized businesses cannot absorb these kinds of price increases. Businesses will close or move abroad, so it’s jolly for Eskom but not so jolly for the rest of us.
Eskom is proposing the hike over five years as a ‘palatable’ alternative to a sudden large hike because it finds itself in a quandary: it can’t raise new debt and it needs expand to meet energy demand (at a cost of about R337bn, it says). Eskom made debt repayments of R127bn and interest repayments of R115bn over the last multiyear price determination period and it feels that without further equity and financial support from government it simply won’t be a sustainable business. (“Just cut executive pay!” someone on Twitter quipped.)
Fitch recently downgraded Eskom’s long-term local currency Issuer Default Rating from ‘A’ to ‘BBB+’, though it revised its Eskom outlook from negative to stable. “Their comments highlight the electricity industry’s need for regulatory and policy certainty, as well as the need for Eskom to be financially sustainable,” said Eskom’s chief executive Brian Dames.
But if Eskom is anxious about its stand-alone investment grade, pleas that we need to ‘keep the lights on’ at any cost are starting to grate. Eskom has a monopoly on energy and it’s hard not to feel it’s holding the country to ransom, knowing full well our economy can’t function without a regular, constant supply. In the meantime, it spends money in baffling ways (business breakfasts to remain ‘politically connected’, TV advertising).
Without competition from independent power producers (IPPs), Eskom can milk us indefinitely as it controls the generation, transmission and distribution of electricity – the whole supply-chain.
Editor’s thoughts:
Australia has explored deregulating electricity markets with the option to re-regulate if companies start to price-gouge. While this would probably not be the solution in South Africa, some competition would certainly not go amiss. Too many people are benefiting from the current stalemate – and that doesn’t include Joe Average’s business, employees or family. What do you think the solution to the current stalemate vis-à-vis Eskom should be? Comment below or email fiona@fanews.co.za.
