Eskom split not about ‘privatising’, says Ramaphosa, as unions plan to take to the streets

As part of an opinion piece in The Sunday Times, President Cyril Ramaphosa has denied that splitting Eskom into three is about “privatising” the struggling energy utility. Instead, the president says the aim is “balancing operations to make the entity more efficient”.

But in an interview in the same publication, Numsa’s Irvin Jim strongly disagrees, saying his union is preparing to take to the streets in protest over the proposed split, which he says is “not about the future of Eskom” but rather about “preparing” the utility for privatisation.

DA leader Mmusi Maimane, also in this week’s Sunday Times, complains about Ramaphosa’s proposed solutions to Eskom’s severe problems, but for the opposite reason to Jim – he believes the president is not doing enough to privatise the parastatal.

“He should have promised that the public will not be paying for the ANC’s destruction of Eskom through higher electricity tariffs, but rather that electricity production will be thrown open to independent operators, and that cities will be able to buy directly from them,” Maimane proposes.

Jim, meanwhile, believes that “an agenda to introduce Independent Power Producers (IPPs) at all costs” is behind Ramaphosa’s proposed split.

This puts the Numsa leader in agreement with the EFF, who also believes government will stop at nothing to introduce IPPs, going so far to say that the recent coal shortage announced by Eskom was made up for this end.

The party alleged in a statement last year that the parastatal is using a “fictional shortage of coal” as an excuse for using independent power producers (IPPs).

According to the EFF, these power producers sell hugely marked-up electricity to the power utility. The party cites the figure of R2.22 per kilowatt, claiming the utility then sells the electricity to users for only 89c, or less in the case of corporations.

READ MORE: DA says ANC will still have stranglehold of Eskom despite unbundling

These power producers have entered into a 20 year long deal with Eskom, who are now forced to fake a coal shortage to justify this, the statement says.

“Eskom has admitted that IPPs are a liability to the utility, and can only serve to destabilise the financial crisis confronting the strategic asset,” it continues.

Speaking during the recent state of the nation address (Sona), Ramaphosa acknowledged Eskom was in crisis and posed a significant risk to the South African economy, requiring bold decisions that would not affect the country’s sovereign rating.

“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings,” said Ramaphosa.

“This business model needs to take into account the root causes of its current crisis and the profound international and local changes in the relative costs, and market penetration of energy resources, especially clean technologies.”

In the short term, Ramaphosa said the state-owned entity would need to reduce its costs, and raise revenue through tariff increases that are also affordable for South Africa.

Ramaphosa also hinted at another possible bailout for the struggling company.

“Government will support Eskom’s balance sheet, and the minister of finance will provide further details on this in the Budget Speech.”

(Compiled by Daniel Friedman. Additional reporting by ANA)

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