Incompetence of Eskom steadily disempowers SA

By Time of article published Dec 10, 2012

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One would think that, with the passage of time and expenditure of countless billions, Eskom’s woes would be on the decline. Instead, there is an ever-growing pile in the chief executive’s “pending” tray, the latest item being the replacement of his chief bean-counter, despite Eskom not being in the bean business.

Since Eskom became the definition of power politics, necessary competence has been replaced with so-called empowerment of well-connected incompetence, directly resulting in national disempowerment. The first thing that disappeared with competence was Eskom’s credit rating and its ability to raise capital on the international market at the best interest rates.

The Eskom of today, just like Telkom and SAA, simply would not survive outside the political cocoon of South Africa and it now builds its balance sheet at enormous consumer cost, instead of recreating creditworthiness through competence and minimising political interference. The inflated price of Eskom power is now threatening the entire economy and forcing major consumers, like Anglo American and Sasol, to generate their own power, evidently more competently than Eskom.

Then we learn of its creativity in the accountancy of power station depreciation, while the applicability of depreciation to long-lived, capital-intensive assets is questionable, particularly if the assets are properly maintained and periodically upgraded. The competitive world is quite happy to operate power plants built in the 1960s, while most of Eskom’s fleet was built in the late 1970s or early 1980s, and it still complains about its ageing assets.

Retiring chief financial officer Paul O’Flaherty whinges about falling sales impinging on trading surplus, while Eskom’s capacity limitations result in it having no more product to sell. At least we have succeeded in making Eskom recognise the real impact of the sinful BHP Billiton contract, only to have it refer the issue to the National Energy Regulator of SA (Nersa) while this is clearly outside the regulator’s purview.

In fact, politics apart, Nersa might give Eskom a round of applause for pulling the plug on the aluminium smelters.

On the planning front, it’s increasingly doubtful whether Eskom can make a plan. Apart from not having the bucks, it cannot consider the nuclear alternative as the country apparently no longer qualifies as a nuclear plant operator. It refuses the cheap option of participating in the Democratic Republic of Congo’s vital 4 000 megawatt Inga hydroelectric scheme, despite Eskom’s grid being necessary to anchor the scheme.

Eskom should be first in the queue to buy Africa’s natural gas as power station fuel while it’s still cheap, but we see no such interest. And then the new five-year, price-doubling plan will probably result in a mass emigration of power-consuming industry (and employment). That would mean that much of Kusile’s generating capacity is redundant and we have been more disempowered than we thought.

Roger Toms

Hout Bay

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