Energy expert Ted Blom says that South Africans are paying more than double what they should be for electricity in the country, and it’s funding Eskom’s corruption and mismanagement.
Eskom this week reported a loss after tax of R2.3 billion for the year ended March 31 from a profit of R900 million 12 months earlier. Sales declined 0.9%, while its gearing ratio, which measures debt relative to equity, went to 72% from 68%.
It also identified R19.6 billion in irregular expenditure for the period.
The group has been in a widely reported financial crisis for some time, with its debt numbers currently the single biggest liability on South Africa’s books – making it the biggest risk to the economy.
Speaking on Jacaranda FM, Blom – who is one of Eskom’s biggest critics, and accurately predicted the group’s downfall over the past few years – said the total value of corruption at Eskom as far higher than the R19.6 billion in irregular expenditure identified in its latest results.
“In my estimate, over the last 10 years, (money lost to corruption) is more than R500 billion,” he said.
Blom explained that a lot of it has to do with how much South Africans have been paying in electricity and what we should be paying.
“This variant over the last 10 years comes to R1.4 trillion rand,” Blom said. “Of that, R800 billion is excess tariff, and R600 billion is the debt that they talk about.”
“For the R1.4 trillion, Eskom has bought assets with a market value of less R100 billion.”
Simply put, because of ‘irregular expenditure’ and corruption, South Africans have been spending more on electricity than they should have.
According to Blom, his audited calculations show that South Africans shouldn’t be paying more than 40 cents a kilowatt hour – while Eskom is currently charging R1.09 for the first block (up to 300kWh) – from there the costs escalate to R1.80 and then to R4.80 when use goes past 1000kWh, he said.
This is, of course, only one of the big problems – the other is Eskom’s bloated workforce, which is also being paid for by the hiked fees.
The expert said that Eskom is overstaffed by 30,000 employees, with the utility only needing 14,000 to operate, while currently employing close to 48,000 people. The 30,000 Eskom workers are also four times over-paid compared to global averages, he said.
“If we get everything cleaned up at Eskom like we should, we could sacrifice 30,000 jobs at Eskom and create 3 million more.”
Ahead of Eskom’s financial results, the expert said that there were many skeletons in Eskom’s closet, with hundreds of billions of rands being fed off in all directions.
Only about 30% of the billions spent on corruption would likely ever be recouped, he said.
According to Blom, the ‘quantifiable’ losses – among others – are:
- 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.