On the back of a R20.7 billion loss for the year, Eskom has a broad four-point plan to turn its failing business around, says energy expert Ted Blom, but it’s not the plan it needs.
In a note published on Friday (2 August), Blom summarised the outcomes of a Q&A session held after Eskom presented its catastrophic financial results for the 2018/19 financial year.
Blom said that the session was a missed opportunity to clear the air and talk about how to clean out the rot at Eskom, and was instead dedicated to politicking.
In the meantime, Eskom has announced a simple four-part turnaround plan, he said.
- Increase tariffs by challenging the previous Nersa-approved Regulatory Clearing Account (RCA) and Multi-Year Pricing Determinations (MYPD) in court;
- Cutting costs (undefined) ;
- Restructuring / unbundling the business;
- Applying for more government bailouts.
Notably, Blom said that the increasing of tariffs through challenging precious RCA and MYPD decisions would see prices increase by 80% for electricity users.
Eskom’s average cost of electricity has already increased over 500% in the last 17 years.
This again places the burden of Eskom’s failures squarely on taxpayers and consumers, while ignoring the real problems at the power utility, Blom said.
Specifically, a “proper cleanout of Eskom” would deal with the group’s costly oversized headcount of over 30,000 persons.
“This would have placed Eskom on a leaner and more agile platform able to reduce electricity tariffs from around R1/kwh to a pre-corruption level of R0.40/kwh (which we were told does not carry the President’s blessing),” he said.
“This, in turn, would spur massive job creation and new business injections as South Africa’s competitive advantage would be restored. Old mines and smelters could re-open – giving substance to the President’s call for cheaper electricity and beneficiation as per the National Development Plan.
“However, we are left with the ideology of tinkering with Eskom’s structure, instead of fixing up the business model,” Blom said.
The energy expert said that Eskom needs to write off more than R1 trillion from an inflated asset register, and introduce competent non-conflicted leadership, and a clear vision to again become the leading utility of the world.
“Instead, government has opted to leave intact a board with near zero of the requirements Eskom desperately needs to turn around the sinking ship, while leading Eskom to its biggest loss in history as well as a continental record in term of size of the loss.”
“Eventually, the penny might drop, but by then it could be too late as skills fly off to greener pastures. And by then government will no longer be able to afford to continue life support,” he said.