Interesting yet altogether disturbing notes from THEWITNESS / PCB ELECTRICITY IMBIZO held at Chamber
House this morning, Friday 31st August 2018.
ESKOM’s plans to recover losses from corruption and loopholes in the Multi Year Price Determination rules by
increasing your tariffs by 30% to recover over R 66 Billion before the end of 2018
Alarming POINTS:
ESKOM will be in R 600 Billion debt by 2022
90% of the country is supplied ESKOM
Right now ESKOM has less than a months’ worth of coal in stock
ESKOM are currently buying coal at R 800/t from Lephalale suppliers who came on board after the selfengineered
load shedding crisis in 2008, whilst ESKOM can get coal supplied locally around the Middelburg
area for R 400/t
ESKOM consumes 10 million tons per month which translates into unnecessary expenditure of R 4 Billion
per month on coal alone
Unnecessary expenditure is not restricted to coal alone: ESKOM have an 1estimated 30,000 too many
employees at CTC salaries of 4 x the World Bank average per post. Salaries at the new Medupi plant are on
average 10 x the World Bank average.
The average CTC salary at ESKOM is R 700, 000.00 per annum
They have 27 GM’s for 6 divisions (in the late ‘90’s there were 6); these F band managers earn R3 -4 M per
annum
They have 488 no. E band managers (in the late ‘90’s there were 40)
Koeberg Power Station by way of example now has 14 no. E band managers; in the ‘90’s there was 1 no.
ESKOM appear to be crying wolf about sabotage- to date there has been no credible evidence of such
instances. The crying wolf tactic is being used to garner sympathy towards the struggles they are enduring
and to substantiate their tariff increases
ESKOM contends that Consumers are expected to help ease their burden
To remain afloat ESKOM will need to increase tariffs by 45% in three years- 15% annually for three years-
THIS ONLY RELATES TO THE NEW APPLICATION
The old application which remains in effect called for 5% tariff increases per year for 5 years
ESKOM’s energy supply debt is simply unmanageable; the new ESKOM chairman says they are unable to
fund their finance costs, never-mind pay back the capital!!
How did we get here?
By way of the Energy White Paper of 1998 ESKOM set about requesting bids for private companies to
supply energy to South Africa. ESKOM still wanted to remain in control and set a profit cap of 8%.
There were obviously no takers.
In 2001 ESKOM opted to go about it themselves, registered ESKOM under the Companies Act, and changed
the business from non-profit to profit seeking
A R16 Billion dividend was paid shortly thereafter; ESKOM have since overspent by R 1.4 Trillion.
Ironically ESKOM now sell electricity at more than 100% mark-up as compared to the 8% limit they
themselves set in 1998
What’s required to turn the situation around?
Government willpower
A proper turnaround strategy developed by industry professionals
Return electricity supply tariffs to 40c/kWh
Forensic audit back to at least 2007
Dumping Renewable Energy Independent Power frauds
Upgrade/ open grid
Open generation licenses
Active citizenry
2
What are we up against?
The ruling party, hence government, uses a ‘balance of forces’ approach- they will only step back when there’s
enough pressure to do so...
The difference between how government and their parastatals operate vs how civil democratic society thinks they
operate is akin to the differences between the rules associated with the games of ‘cricket vs cage fighting’.
New ESKOM Chairperson, Jabu Mabuza, states that the only way to keep Eskom going on a business as usual
approach is tariffs and taxes.
Businesses need to audit their exposure to Eskom – electricity costs for heavy users used to be in the region of 5% of
their total costs, today this is up to around 15% and set to increase steadily unless challenged.
Business which are heavy consumers of electricity and which are operating in the region of a 20% profit margin will
be battling to survive in the next 12- 18 months.
TO COMPOUND MATTERS EVERYTHING DISCUSSED ABOVE HAPPENS BEFORE THE ELECTRICITY IS SUPPLIED TO
LOCAL GOVERNMENT, WHO, IN TURN SUPPLY ELECTRICITY TO END USERS USING THEIR OWN INFRASTRUCTURE
AND TARIFF/ BILLING SYSTEMS. The issues in essence are mirrored and multiplied by a factor two, if not more.
What should we do?
Pray?
Protest?
Plead?
Fight or flight?
Make alternative arrangements to sustain home/ business practices?
To begin with we can?
Practice Active citizenry
Insist on ESKOM transparency
Insist on ESKOM accountability
Insist on ESKOM write downs
Revert ESKOM to being a non- profit organization (although they seem to be doing a good job of that
already!)
Allow free market electricity supply
Adopt an ‘agnostic’ technology approach, in other words adopt whichever is best for the economy and
particular industry
This is a CALL TO ACTION- you cannot expect to live in a democratic society without being an active participant of
the associated democratic processes. This is also a WARNING that unless something is done to arrest the ‘business
as usual’ trajectory of ESKOM the economy as we know it will undoubtedly falter and ultimately affect everybody
drastically, with indigent communities being hardest hit.
Some of the actions listed above are rather lofty and will take time to come to fruition, at the very least help get this
message out there NOW and take the time to leave your comments on the energy expert coalition
website https://eeco.co.za/projects/comment-on-tariff-hikes/
The webpage provides a well-structured SUMMARY of the issues at hand, as well as supporting documentation,
which can all be used to assist with your comment regarding ESKOM’s plans to recover losses from corruption and
loopholes in the Multi Year Price Determination rules by increasing your tariffs by 30% to recover over R 66 Billion
before the end of 2018.