Eskom and the SONA


Industry shares sentiments on Eskom, energy landscape following SoNA

8th February 2019 BY: MARLENY ARNOLDI 

Photo by: Bloomberg

Following President Cyril Ramaphosa’s State of the Nation Address (SoNA) on Thursday evening, Business Unity South Africa (Busa) said it concurred on the urgent need to implement an effective turnaround strategy at Eskom. 

The organisation also welcomed the general thrust of policies mapped out both in terms of social and macroeconomic initiatives, which come in tandem with programmes of work designed to give effect to the SoNA.


“The speech is unequivocal in sketching South Africa’s national priorities and unambiguous about its policy direction, as well as setting the country on course to become a dynamic future-oriented economy. 

“Although Eskom is the most pressing case among State-owned entities, this is also the opportune moment to take decisive action on parastatals to ease pressure on State finances,” the organisation said.


Busa emphasised that meaningful and aligned action, as well as implementation, were needed to give tangible expression to and reinforce the national vision articulated in the SoNA.

It will also be crucial to hold Cabinet to account on ineffectual delivery. 

Some industry bodies, businesses and unions, however, believe Ramaphosa is still underestimating the challenges faced by State-owned power utility Eskom and that many issues remain unaddressed.

Business grouping Sakeliga warned that breaking Eskom up into three specialised companies would do nothing to address the underlying issues that currently cripple the utility.

“This is especially true if each of those companies are, in themselves, State monopolies in their respective areas as well.

“But the problem lies deeper than merely the management of Eskom in recent years, or its corporate structure. The real cause of the problem is probably the way in which the electricity sector in South Africa has been sheltered from the free market – and, with it, free market competition,” said Sakeliga.

Nevertheless, the organisation welcomed the President’s call on South African electricity consumers to pay for the electricity they use.

“While Eskom’s financial problems, and the concomitant tariff increases, are largely self-inflicted, it is manifestly unjust that certain customers should enjoy services at the detriment of others. This is particularly problematic in the context of certain municipalities being cut off from the national grid – punishing even paying customers in good standing,” the organisation said.

The Organisation Undoing Tax Abuse (Outa), meanwhile, welcomed the prioritisation of Eskom’s recovery, but has called on the finance-lending houses to play their part in restructuring the loans and finding solutions to Eskom’s predicament, since the finance houses were, after all, “part of the problem in taking up unnecessary bonds, purely because they were backed by government guarantees”.

Outa said that although splitting Eskom into three separate units was a good start, retaining these under a single Eskom Holdings company seemed like “rearranging the deckchairs on a sinking ship” and that Eskom would need to develop a new business model.

Intellidex’s Peter Attard-Montalto commented that incentive issues and a monopoly mindset would remain even if Eskom was separated.

“This is a complex process that may well take around two years, even if newco subsidiaries are set up straight away as shell companies. There is also risk of duplication and bloat remaining.

“The major disappointment of the SoNA on Eskom was how a new tariff was described as ‘affordable’ despite there being, in our view, no intersection between affordability, demand cliff edges and Eskom’s going concern. Equally, the need to address municipal arrears was raised yet again but with no new policy or detail to convince that there will be any change on that front,” he said.

Greenpeace Africa, meanwhile, welcomed Ramaphosa’s commitment to change direction on renewable energy but said Eskom’s unbundling did not go far enough to solve the prevailing reliance on coal for generation. The organisation would have wanted to see a coal phase-out plan before it takes the President’s statements to heart.

The South African Wind Energy Association (SAWEA) also welcomed the President’s sentiment towards clean energy, adding that the renewable energy sector has invested close to R202-billion in the economy, with 36 500 jobs created thus far.

“We are reassured that government has recognised strong performance from renewables and chosen a policy path that seeks to optimise their investment potential, specifically around job creation and gross domestic product (GDP) growth,” said SAWEA chairperson Tebogo Movundlela.

Through the smoothed allocation of 1.5 GW of wind energy capacity a year between 2021 and 2030, the country can expect a total GDP impact by the wind industry alone of about R200-billion by 2030, along with the realisation of over 70 000 jobs (from construction, operations and maintenance), the industry body pointed out.


The South African Federation of Trade Unions (Saftu), meanwhile, noted that the emptiness of Ramaphosa’s promises to create jobs was exposed when he announced the unbundling of Eskom into three units – generation, transmission and distribution – a process which the unions have agreed is a threat to thousands of jobs.

Saftu said it simply did not trust that the President would keep the promise to consult unions and for the government to embark on a just transition to protect jobs.

“What has stopped the government from consulting workers and communities of Mpumalanga when they signed 27 agreements with independent power producers (IPPs)?

“Why [was government] refusing to disclose who owns these IPPs and who are the black economic empowerment partners? Why must we believe a promise of a just transition when these IPPs, subsidised by Eskom to its detriment, are allegedly threatening the jobs of up to 90 000 workers through the closure of five [coal-fired] power stations?”

The federation added that the announcement of the unbundling of Eskom is a declaration of war and that government should expect resistance from the poor and workers.

The National Union of Metalworkers South Africa (Numsa) was also preparing for a battle following SoNA. According to Numsa, the President confirmed the union’s “worst fears”, which is that government is slowly privatising State-owned entities.  

Numsa believes prices will increase and jobs will be shed once the private sector is allowed to step in.

The union demanded that workers in the coal sector be retrained and absorbed into the renewable energy sector, so that communities are not affected by the “just transition” in the energy sector.

Numsa said it would defend Eskom in the streets.

Additionally, National Union of Mineworkers rejected the splitting business model, stating it will only enrich the elite, while resulting in more expensive electricity.

"If government wants to save costs at Eskom, they must cancel the 27 IPPs agreements that are costing Eskom about R93-million/d. We are not against renewable energy, we are saying that IPPs must stand alone and compete with Eskom." 

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