Eskom sneezes, but municipal pandemic looms

The utility reminded South Africa last weekend what it’s been missing for 10 months, but the deeper problem threatening Eskom’s future doesn’t come from within its power stations.
3 mins read

Eskom’s abrupt resumption of blackouts last weekend was just a “temporary setback”, says CEO Dan Marokane, but darker days lie ahead unless rocketing unpaid municipal bills are sorted out. 

Marokane was speaking at the Mining Indaba yesterday, in a packed-out lunchtime session at which Transnet CEO Michelle Phillips was also put on the spot about the slow-burn recovery at the ports and rail operator. More than anything, however, Eskom, and the reliability and cost of power, has been the subtext of most sessions at the indaba.

The return of load-shedding after a 300-day hiatus was hardly the curtain-raiser to the indaba that anyone wanted – especially as mining investors from all over the world arrived in Cape Town to tentatively feel out whether South Africa’s much-hyped “economic recovery” was all it was cracked up to be.

Last Friday, Eskom removed 3,000MW of power supply from the grid as plants at Lethabo and Matimba broke down, a move which caused the rand to dip 0.6% and saw South Africa’s bond weaken. Coincidentally, this happened one day after the electricity regulator granted Eskom permission to hike tariffs by 12.7% next year, which was roughly a third of what it asked for. 

Marokane sketched a picture of a power utility that has just the odd sneeze left in its system, having largely recovered from a bout of flu which left the country flat on its back for the better part of 15 years. 

“We’ve always said we’re not out of the woods yet,” he said, adding that Eskom is still adding additional capacity to the grid to “augment the progress that has been made from the overall maintenance and recovery of the generation fleet”.

There are, he said, still risks in the system. “This is the reason why we have not pronounced on the end of load-shedding.”

Everyone else has though. South Africa’s stumble back into the light after the Eskom-induced darkness was a centrepiece of President Cyril Ramaphosa’s pitch to the global investment community at the World Economic Forum in Davos. And Mteto Nyati, Eskom’s chair, has spoken repeatedly about how load-shedding has been defeated.

Economists have spoken of GDP growth north of 2.5% in this post-blackout world and even the ratings agencies – who were sceptical a year ago that the lights would stay on – are now more encouraged. 

But that is perhaps premature; this trajectory is deeply contingent on the fate of the country’s imploding municipalities. 

The R90bn problem

No-one who lives in Joburg needs reminding of the epileptic water supply, the crumbling roads, or parlous city government, which might as well have hung a “gone fishing” sign around its neck for the past five years. And it is multiples worse in towns like Makhanda in the Eastern Cape, or Lichtenburg in the North West.

The problem for Eskom is that so many of these towns and cities haven’t bothered paying for electricity for years, which means they now owe Eskom more than R90bn at last count. Even the City of Joburg, which should understand the imperative to pay bills, has been involved in a high-profile fight with Eskom, with its unpaid debt having spiked to R4.9bn.

Marokane told the Mining Indaba, however, that there has been a U-turn in the utility’s strategy of collecting these bills. 

“Us running to the courts, and the threat of switching off towns and cities, does not work any more because we’ll be switching half the country off, including the economic hub of the country,” he said.

Rather, he said, Eskom is trying to find a solution where “people come willingly” to pay this debt. Marokane said he is “optimistic” that there is now political will to ensure this happens.

Too optimistic, maybe. In November, Joburg’s new mayor, Dada Morero, leant on Eskom to scrap a notice of cut-off sent to the city. When this went nowhere, Morero went above Marokane’s head to lobby electricity minister Kgosientsho Ramokgopa, evidently to find some sort of political solution.

With the sort of double-speak that has made the city famous, Morero told a media briefing after this meeting that Joburg’s problems in paying were not due to cash flow, but rather a problem of meeting payment deadlines. Or, to phrase it another way, Joburg is administratively inept, rather than broke. 

More to the point, even if there now is “political will”, the R90bn question is how effective this will be, as it was a lack of oversight from this political centre that allowed so many towns to go feral in the first place.

The stakes, as we all know from the load-shedding schedules, couldn’t be higher. 

Said Marokane: “The reason why we want to tackle [this issue] is to avoid a situation where we have to go back to National Treasury. To date, Eskom has had almost R500bn injected into it; it’s time we demonstrate to the country where that investment is going.”

That would be nice – and useful, too, especially if Eskom wants to convince more people its services are worth paying for. 

This coverage of the Mining Indaba was brought to you in association with Northam Platinum.

Sign up to Currency’s weekly newsletters to receive your own bulletin of weekday news and weekend treats. Register here.

Rob Rose

With more than two decades in business journalism and as an author of Steinheist and The Grand Scam, Rob knows his way around a balance sheet. While editor of the Financial Mail for eight years, the title bucked the trend of falling circulation, producing award-winning news.

Latest from Economy & Markets

Donald Trump vs BEE

Trump’s opposition to race-based policies puts renewed scrutiny on South Africa’s transformation drive…

Don't Miss