Johannesburg -
Further damage to the economy, protracted load shedding, a sovereign credit rating downgrade, civil unrest and even a countrywide blackout; the Department of Public Enterprises sketched some of the risks posed by a struggling Eskom this week, and the picture wasn’t pretty.
The department has estimated that load shedding in stages one and three costs the economy between R20 billion and R80bn a month. If the power utility doesn’t leave the emergency room soon, these hypothetical risks could become an unpleasant reality.
The challenges are daunting, starting with the completion within (revised) timeframes and reasonably within the (adjusted) budgets of the Medupi and Kusile coal-fired power stations and the Ingula pumped storage station – all of which have been badly delayed and are well over their budgets.
“It took us four years to finish one unit of Medupi and we still have six more (units) to go. We were saying in the department that if that is the benchmark… it’s going to take us 24 years to complete the power stations,” acting director-general Matsietsi Mokholo told MPs during a briefing on the department’s strategic plan.
Eskom’s inability to meet demand for electricity has not only put the brakes on the economy, but played havoc with its bottom line, leaving it short of funding for much-needed capital investment.
Its recent credit rating downgrade to junk status has complicated the picture. If it has to draw on government loan guarantees, the entire country could suffer a similar fate.
The problem, from the department’s point of view, is that it has limited say in how Eskom is run, as it performs the role of sole shareholder and leaves operations to the board and management, in line with the Companies Act. Public Enterprises Minister Lynne Brown made this clear when she said this week that she was “hamstrung” by the Companies Act.
“I’m responsible as the shareholder representative for the company.
“The issue is that I shouldn’t be politically interfering, managerially interfering, operationally interfering, in the running of the company.”
Brown conceded, however, that she did have oversight responsibility.
She was replying to questions about ructions in the board, which initially announced the suspension of four senior executives, including chief executive Tsheiso Matona, pending a probe into the causes of Eskom’s underperformance – but then seemed to turn its sights on chairman Zola Tsotsi.
MPs also asked about reports of irregularities in the procurement of coal and diesel – with the budget for this having been exceeded by R8bn, while the company sought a 25 percent tariff hike.
Brown said the slow progress in moving from diesel to (far cheaper) gas at the open-cycle gas turbine peaking stations – meant to supplement supply in times of need, but running full tilt during the energy crunch – was one of the concerns that had led to her to call for a “deep dive” probe into Eskom’s affairs. It was subsequent to this call that the board suspended the four.
But Brown indicated to MPs that she was none the wiser about procurement irregularities. She has subsequently asked, however, to be brought up to speed on “the big procurement areas in the next couple of months”.
Mokholo linked the department’s ability to turn Eskom around to increased powers for the minister to intervene when necessary. “Questions around the powers of the minister become critical. Because if the minister is not able to influence the operational challenges facing the state-owned companies, the minister is not able to change their financial outlook and they would not be able to grow,” Mokholo said.
Officials are working on a draft State Owned Companies (SOC) Bill intended to address this, among other issues.
“Is it the shareholder model that is failing, or is it the SOCs that are failing the shareholder-management model?” Mokholo said.
That’s the chicken-and-egg question that’s key to resolving many of the problems in the country’s ailing parastatals.
It could also be stated as: should the executive be more involved in the operations of state-owned companies, or should it simply make sure it appoints the right people in the first place?
Sunday Independent