Corruption, contractors and inefficiency – 10 things crippling Eskom and costing South Africa billions

Crisis-hit power utility Eskom is expected to publish its financial results on Monday, with analysts expecting the company’s many skeletons to tumble out of the proverbial closet in the numbers.

Energy expert, Ted Blom, says South Africans should prepare themselves for the worst, anticipating tens of billions of rands lost to corruption, overspending, over-staffing and overvaluation.

According to Blom, Eskom has, over the past 10 years, perfected the highly lucrative art of “crying wolf” – a tariff raising strategy which has enabled the SOE to fleece the South African economy of some R1.3 trillion.

“For Eskom, this has been highly rewarding gameplay, but finally the public and Nersa have woken to this trick,” he said.

“If the government or president Ramaphosa are serious about slaying corruption, then this is where the investigation needs to begin.”

The energy expert listed 10 things that South Africans should look out for in Eskom’s results:

  • Approximately R30 billion in derivative losses emanating from the Gupta capture of Eskom treasury;
  • Approximately R50 billion in contractors claims on capital build;
  • Approximately R500 billion in asset overvaluation directly attributable to the high tariff regime currently prevailing;
  • Overvalued coal stocks and continuing corruption in coal procurement of around R8 billion per annum;
  • The overstaffing and capitalised salaries relating to the 30,000 overstaffed employees (although Blom expects several thousand of these to be “ghost workers”);
  • Continuation of the questionable Eskom phantom bonus scheme which milks millions of rands annually in favour of already over remunerated senior employees);
  • Further breakdowns in plant availability due to poor maintenance and poor quality coal (including Kusile);
  • Inflated coal costs resulting from road transport costs from Medupi;
  • Increasing burden on Eskom as a direct consequence of corruption;
  • Questionable contracts on renewables which force the utility to pay for electricity at a higher rate than Eskom’s costs and which decimate Eskom’s sales (and ability to service debt).

Blom predicted in 2013 that Eskom would collapse in 2018 due to the above ‘skeletons’ which have been hiding in plain view.

He said that a good way to start turning things around would be to clean up Eskom, and bring electricity prices down below 40 cents per kilowatt hour – a 50% reduction.

“This will spearhead the South African economy and job growth. A reduction in the price of energy from an efficient Eskom will bring extensive financial relief to both the state and citizens,” he said.


Read: Cash-strapped Eskom could lay off about 15,000 workers – report

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Corruption, contractors and inefficiency – 10 things crippling Eskom and costing South Africa billions