050910 Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. South Africa will need 20 gigawatts (GW) of new power generation capacity by 2020 and would require double that amount a decade later to meet rising demand, the country's power utility said September 7, 2009. Picture taken July 17, 2009. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS)

Johannesburg - As desperation grows about South Africa’s economic performance, the ANC has rejected Eskom’s unpopular five-year tariff plan and wants to ensure less disruption in education by declaring it an essential service.

After its national executive committee (NEC) lekgotla, the party has also warned its labour allies that policy won’t remain pro-worker in the pursuit of job creation.


The decision, coupled with what appears to be a plan to push for a version of the youth wage subsidy, spells hard times ahead for the relationship between the ANC and its leftist allies.

It is understood that Eskom’s proposed 16 percent price hike was lambasted at the party’s three-day lekgotla and that Public Enterprises Minister Malusi Gigaba has been asked to “attend to the matter”.

The role of Eskom came under intense scrutiny during the gathering, which was attended by NEC members, alliance partners, ANC cabinet ministers and premiers who are not on the NEC, as well as several directors-general.

The gathering in Pretoria will be followed by a cabinet lekgotla that must sign off on the government’s programmes and provide the basis for President Jacob Zuma’s State of the Nation address on February 14.

In 2008 Eskom sought a 60 percent increase. At the time, the ANC made a submission to the National Energy Regulator of SA during public hearings that the increase should be staggered over five years and that investment in infrastructure should come from the public purse.

At the lekgotla, it is understood that ANC leaders felt that Eskom had “reneged” on what the party took for an agreement with the power utility.

Steep electricity tariffs will have a negative effect on the objectives contained in the government’s beneficiation strategy, industrial policy action plan, New Growth Path and the infrastructure development programme. It will also debilitate the working class and the poor. Eskom’s role was robustly debated, with many questioning the wisdom of pumping billions into smelters that were not “labour intensive”.

Some of those who participated in the discussion argued that electricity provision should be understood not only in “technical terms”, but also in a “political and economic” context.

The relationship between the coal mining industry and Eskom should also be factored in, they argued, especially if one considers that coal in South Africa is being mined for export purposes.

Last week Mineral Resources Minister Susan Shabangu told a gathering of coal exporters that the ANC had declared coal a strategic mineral, flagging potential protectionist measures such as a levy or a price cap.

Meanwhile, the ANC’s decision to have education declared an essential service will no doubt set it on a collision course with teacher unions and could foreground a stand-off between the party and its allies, especially Cosatu.

Zuma was the first to publicly argue for education to be made an essential service during an interview with CNBC Africa. His off-the-cuff remarks created a political storm, with unions blasting the government for seeking a “quick-fix solution” by curbing the right of teachers to strike, instead of dealing with the real issues that drive the crises in education.

Cosatu opposes the move as a backroom effort on the part of the state, which is using the crisis in education to have the entire public service declared as essential. The state, one of the biggest employers, and public sector unions have locked horns repeatedly, with some disputes descending into violence.


“Essential service” is a legal concept that refers to a service that can affect whether one lives or dies. While there is popular support for education to be a priority, the legal ramifications could prove a minefield, a warning already issued by the SA Democratic Teachers Union.

The lekgotla recommended that the ANC consult its allies and all affected parties. ANC officials did not want to comment, saying they would announce the outcome of the lekgotla tomorrow.


Finance Minister Pravin Gordhan, who provided an economic overview at the start of the lekgotla, sketched a bleak picture regarding the country’s economic woes, cautioning against reckless consumption and urging austerity measures.

He warned party leaders that they needed to accept that a trade-offs would have to be made on interventions to implement the five priorities of jobs, education, rural development, crime and health.

He also spoke of the negative effect downgrades by rating agencies had on attracting investment.

It is understood that Gordhan said that when compared to countries such as Brazil and Turkey (both used state-led stimulus packages to drive economic growth), the government’s R1 trillion infrastructure stimulus package did not have similar positive spin-offs.

Gordhan reportedly told the lekgotla that the much-vaunted infrastructure roll-out plan, which is the bedrock of the state’s efforts to fast-track growth, did not lower debt levels sufficiently or decrease the cost of borrowing.

He reportedly told the gathering that the rate of growth remained sluggish and recovery from job losses was not fast enough.

Anglo American Platinum’s proposed 14 000 job cuts did not bode well, the finance minister added. He warned against continuing to spend on the “consumptive economy” and said spending should focus on infrastructure.

Gordhan urged speedier and tough action on corruption and said a cutting back on frills was needed. The past three years had also been characterised by a massive decline in private sector spending in the economy.

His overview received mixed reactions, with some saying he was “exaggerating” with a view to force the party to rethink its decision to have the state as a key player in job creation, while others agreed the party had to tailor its programmes to reality. - The Sunday Independent