The future structure of South Africa’s debt-laden electricity producer Eskom emerged as the central topic during the debate on President Cyril Ramaphosa’s February 7 State of the Nation Address (SONA), in which he announced that the utility would be split, under Eskom Holdings, into three independent units of generation, transmission and distribution.
The debate was held amid a return to confidence-sapping rotational power cuts and against a backdrop of growing trade-union opposition to Ramaphosa’s restructuring plan.
While arguing that Eskom should have been unbundled ten years previously, Democratic Alliance leader Mmusi Maimane, who is the leader of the official opposition, argued that the proposed restructuring would be halted under pressure from those unions aligned to the governing African National Congress (ANC).
“Honourable President . . . I’m sure you’d love to unbundle Eskom – as you should have done ten years ago – but your ANC-aligned unions won’t allow this,” Maimane said in an address framed by the argument that Ramaphosa’s administration was paralysed to act as a consequence of ANC factionalism.
Economic Freedom Fighters (EFF) commander in chief Julius Malema, on the other hand, described the proposal as “extremely dangerous” and warned that his party would join picket lines to defend Eskom from what the EFF perceived as an attempt to privatise the utility.
“Let us deal with Eskom’s problems openly and honestly, because an attempt to privatise it will never be accepted. You must be rest assured, Mr President, if you are not going to give an assurance that you will relook into this Eskom matter we will waste no time, we will go to the picket lines and defend this strategic asset of our people.”
Malema even called into question the intentions behind the restructuring plan, suggesting that it was driven by the greed of those “friends and family” of Ramaphosa intent on profiting from Eskom’s privatisation.
Malema appeared to be tapping in to the considerable opposition to the unbundling plan being voiced not only by the National Union of Metalworkers of South Africa, but also unions, such as the National Union of Mineworkers (NUM), which falls under the umbrella of the ANC-aligned Congress of South African Trade Unions. The NUM has called a media briefing for February 14, where it will communicate its response to the unbundling plan announced in the SONA.
There is particular apprehension that the restructuring could result in job losses, which has been further spurred by the recent retrenchments of high-level executives at Eskom.
Staff morale is said to be low, which has even led some to speculate that the recent incidents of load-shedding, including the shock declaration of Stage 4 load-shedding on February 11, might be attributable to incidents of sabotage.
Nevertheless, business is generally supportive of reform, having warned on several occasions that Eskom's current model is no longer fit for purpose.
Likewise, energy experts have argued that, unless changes are made, Eskom will fall victim to a utility death spiral, whereby sales fall as costs surge, and will also be ill-equipped to deal with the technological changes that are disrupting the electricity industry domestically and abroad.
Although Ramaphosa insisted in his SONA that Eskom's new business model would be introduced immediately, he also promised that there would be “meaningful consultation and dialogue with all key stakeholders” as government moved to address Eskom’s challenges.
“We will lead a process with labour, Eskom and other stakeholders to work out the details of a just transition, and proper, credible and sustainable plans that will address the needs of all those who may be affected.”
Following the SONA address, Public Enterprises Minister Pravin Gordhan said the consultation process with stakeholders, and in particular with organised labour, would commence as soon as possible.
Gordhan told Eskom employees that the announcement represented a “great moment” for the utility. “We were given the political leadership to transform this institution into viable, sustainable, dynamic energy provider for South Africa, well into the future. We must become partners in shaping that future, as we go forward.”
The Minister also used his address in response to the SONA to announce that government would be seeking outside assistance to address the operational problems at Eskom, of which problems within the generation business were paramount.
These included breakdowns both within the aging coal fleet and at the Medupi and Kusile projects, where the units in commercial operation where not producing to nameplate capacity and were "regularly tripping".
"We are calling on ENEL, one of the world’s leading energy suppliers, to provide us with external technical assistance. ENEL will be sending two to three coal power station engineers to South Africa shortly," Gordhan reported.
He also revealed that top engineers, who had left the South African utility during the recent period of corruption and State capture, had indicated a desire to "return home and to contribute to the rebuilding of Eskom".
"These experts will, amongst other things, conduct a full operations audit of all power stations to give us and the board an independent view of where the most serious problems are. They will also train, mentor and transfer skills to a younger generation of Eskom engineers so that we build a capable team to run our electricity system into the future."