Rumours are wrong, says Pravin Gordhan — Eskom will be unbundled

Public enterprises minister Pravin Gordhan says the unbundling of Eskom is on track — contrary to public speculation.

Opposition political parties last week claimed the ANC had been cowed into silence and inaction by its alliance partners, Cosatu and the SA Communist Party, on the issue of unbundling Eskom. This, the parties said, explained why President Cyril Ramaphosa did not mention unbundling in his state of the nation address last week.

“Eskom has begun to develop a road map to implement the proposals in the February 2019 state of the nation address: to separate its generation, transmission and distribution functions into three separate business entities, wholly owned by the state,” Gordhan said in his state of the nation address debate speech on Tuesday, which was briefly interrupted by the EFF.

The EFF staged a walkout, accusing Gordhan of being a “constitutional delinquent” — a reference to a controversial report by public protector Busisiwe Mkhwebane, who directed Ramaphosa to “take appropriate disciplinary action” against the minister for approving former SA Revenue Service commissioner Ivan Pillay’s early retirement package. In her report the public protector said Gordhan’s actions amounted to “improper conduct” and violated the constitution. Gordhan has taken the report on review.

The government wants to split the embattled power utility into three separate units: generation, transmission and distribution. Trade unions argue that the proposed split will not solve Eskom’s governance and debt problems, and that it will lead to job losses.

Those in favour of the unbundling argue that it will create a more efficient system. A separate Eskom entity focusing on transmission, for example, will give it an incentive to procure electricity from the best-priced producers, including independent power producers (IPPs) in the renewable energy space. This reduction in costs could then be passed on to the consumer.

“There is no deviation from this strategic path [splitting Eskom] — not in cabinet or in government — contrary to persistent public speculation,” Gordhan said in his speech.

The power utility, which supplies virtually all of SA’s power, is hamstrung by staggering debt, maintenance issues and design flaws at its new coal power stations, Medupi and Kusile. Eskom has sufficient cash to meet its obligations until October.

In his state of the nation address last week, Ramaphosa said Eskom would receive a larger portion of the R230bn support promised in February’s budget sooner, in order to alleviate its financial crisis.

Eskom has a staggering R440bn in debt, which it is struggling to service from the revenue it generates. It is also unable to repay the R45bn of debt that falls due in 2019 or to raise new funding from financial markets.

It had to resort to stage four load-shedding in March as it could not meet demand.

Recent statistics compiled by the Council for Scientific and Industrial Research energy centre show that without renewables SA would have experienced higher stages of load-shedding more frequently.

In his speech, Gordhan indicated that SA will need to ramp up procurement of renewables. “How do we reduce our dependence on nonrenewable sources of energy, reduce carbon emissions, introduce new carbon capture and battery technology,” the minister said.

Gordhan said, however, a “just transition” will form part of Eskom’s shareholder compact. The transition is linked to the decommissioning of older Eskom power stations, and identifying social interventions to secure the futures of communities and workers clustered around these power stations.

“We need to create a forum that brings together mineworkers, organised labour, business and mining companies in particular, coal transport and freight companies, departments like energy, environmental affairs and social development, and communities,” he said.

The IPP programme has been criticised by trade unions, the EFF and former Eskom officials, who claim that the costs are responsible for the financial crisis at Eskom. However, earlier in 2019 Jeff Radebe, the former energy minister, dismissed the assertions, saying the renewable energy IPPs were cost-neutral to Eskom as the cost was passed on to the consumer.

In his speech, DA leader Mmusi Maimane proposed several reforms to turn around state-owned entities and improve education and health care.

On Eskom, Maimane said: “The last thing we should be doing now is committing ourselves to a decade or more of bailouts for Eskom. We must immediately split Eskom into two entities and open the market to more independent power producers, particularly solar power in our sun-rich nation.”

Maimane said solar power is to the energy sector what Uber became to the transport industry, and SA cannot afford to be left behind. “We must allow well-functioning municipalities to buy directly from IPPs. Eskom requires us to move away from being coal dependent to other technologies.

“While we are splitting Eskom, we must also sell off SAA. It is a luxury we neither need nor can afford,” the DA leader said.

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