OPINION: Current Eskom model is obsolete
The Eskom paralysis has confined the economy to a low-growth trap that would be difficult to get out of - something that will lead to the already disgraceful inequality levels widening.
The SA Reserve Bank (Sarb) this month said that it estimated growth of just 1percent while the Bank of America forecast it at 0.9percent.
The Organisation for Economic Co-operation and Development has also revised its forecast downwards and the National Treasury is expected to follow suit when it tables the Medium Term Budget Policy Statement in October.
Sarb and the Bank of America flagged power interruptions in the first quarter as a significant contributor to the performance of the economy, with manufacturing and mining output contracting.
The operational and financial challenges of Eskom also threaten to undermine one of the ruling party’s key objectives, to re-industrialise the economy.
Pigs would have to grow wings first, because that happens as the country can hardly guarantee uninterrupted power supply.
It is no coincidence that the manufacturing sector is also limping along, as production last outstripped gross domestic product (GDP) growth between 1946 to 1980.
The sector began its downward slide around the same time Eskom saw its fortunes waning from 1983.
It has remained moribund in the past two decades, due to self-inflicted policy (in)decisions.
Its decline has also spilled over into export revenue.
Eskom has an important role to play in moving the country’s export profile from being too reliant on natural resources to building sophisticated sectors that can absorb thousands of people into employment.
It is, therefore, imperative that President Cyril Ramaphosa’s administration ensures that the decline in the manufacturing sector’s share of GDP is significantly reversed.
Uninterrupted and sufficient electricity supply is one of the most important determinants that can boost manufacturing output in any economy.
The restructuring of Eskom will not fly unless the power producer is set on a new course and rebuilds to meet the demands of today.
The world has moved on while we bickered about whether we should continue in our destructive obsessions for fossils or whether we should embrace the future.
The simplistic diagnosis has been to blame state capture for the paralysis of Eskom.
This is but just a part of the whole picture.
The blame can also be laid on successive government failures to adapt and learn from the world’s best practices on how a 21st century power producer should be run.
Former president Jacob Zuma was still a celebrated peacemaker in the late 1990s, even receiving the Nelson Mandela Award for Outstanding Leadership in Washington in 1998, when the dilly-dallying around the future of Eskom ensued.
The Energy Policy White Paper of 1998 made a case for the privatisation of Eskom and its division into three entities. This was never done, until Ramaphosa announced the break more than 20 years later in February.
A lot has changed since the 1990s. Technologies have evolved, environmental and social concerns have undergone a revolution and Eskom has been stuck the past, basking in its past glory.
Ramaphosa should go for broke and reinvigorate the Integrated Resource Plan to plan and support the transition to renewables, while ensuring that supporting Eskom’s does not divert funds from other areas of the economy.
One has to cast one’s eyes to the US to borrow from offshore best practices. NextEra Energy, a Fortune 200 energy company, is one of the world’s leading energy producers. The company has gone through significant evolution since its establishment in 1925 (Eskom was formed in 1923).
Today NextEra has about 45900megawatts of generating capacity, with revenues of more than $17billion (R248.08bn), and about 14000 employees (Eskom has more than 40000 workforce).
The company’s first wind site came online in 1998 and in 2009 became the US’s largest producer of wind power.
The time has come for Eskom to look at its past to move forward with stealth at the opportunities that lie ahead and the new chief executive should be brave enough to stand his/her ground against unions and political interference.
It was madness to expect Phakamani Hadebe to make a Fiat Uno perform like a Maserati.
His successor should take from John Maree’s book, who upon taking over as chairperson of the then newly created Electricity Council in 1985 went against the tide and unshackled himself from political influence.
Maree accepted the position on condition that he could be his own man and make his own decisions.
One of his lasting legacies was the reduction of Eskom’s bloated staff from 66000 to 50000 in just five years.
Hadebe’s successor should succeed where he failed; taking the punches from trade unions and do what ought to be done; cutting Eskom’s bureaucracy.
The Eskom of 2019 resembles that of the mid-1980s and demands the same decisive response.