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Article compiled  by: White Nation  correspondent Witbank– March 11 2017








THE incompetent cleptocrats of ESKOM has lashed out at critics, saying that the power provider’s continued failings are an ongoing symptom of the “apartheid”  government.

Image result for Khulani Qoma escom


In an official statement released in The Star (9 March), Eskom spokesperson Khulani Qoma specifically targeted a Business Report letter by energy commentator Roger Toms, noting that, like his fellow critics, he offered nothing of “substance but a disguised eulogy for the evil system of apartheid”. “Eskom’s current challenges are the direct consequence of the ineptitude of Toms’ venerated “apartheid “ state. Energy planning had been earmarked for whites only, as blacks had systematically been excluded,” said Qoma.

“The current board is cleaning up this very toxic mess. It would be interesting to see how many letters Toms pushed in the 1980s complaining about the lack of a just energy policy that left the black majority in darkness and issues of incompetent planning that resulted in over-capacity leading to some of Eskom’s power stations being mothballed.” Qoma further defended current Eskom chaiperson Dr Ben Ngubane, who he noted had not been not been found to have acted irregularly or corruptly by any competent authority,

He also noted that”  the utility would not allow 2016’s State of Capture report to influence its internal policies as it was “admittedly inconclusive and therefore any responsible person would not use the contents thereof as though they were conclusive.”

With news of state capture making headlines across South Africa in 2016, and the unexpected resignation of the state power utility’s CEO Brian Molefe, it was easy to overlook an annexure in the Finance Minister’s medium term budget statement dealing with government’s exposure to state owned enterprises, and some of the finer points of Eskom’s interim financial results. A closer look suggests that South Africa’s largest state monopolizing owned enterprise may not be in as strong financial shape as generally thought. The power utility’s interim results show increasing costs and a decline in profits for the first half of the year. The relatively modest level of profits that were achieved provide little comfort when looking at a set of high probability risk factors unfolding over the next few years.

These include the fact that about R40 billion of under-recovered costs that had been expected to be decided by the end of this year are now unlikely to be reflected in tariffs until 2018/19, or later. It also seems highly feasible that tariff increases scheduled to start in April 2018 will be delayed in the courts, with the next major tariff increase perhaps set back to 2019/20 under this scenario. The picture becomes more troubling when looking at the medium term. Eskom’s borrowings and finance costs are set to increase significantly over the next few years. Payments to independent power producers could easily double, and further increases in revenue are unlikely to match historical trend. With government financial exposure to the power utility at R368.5 billion – and perhaps doubling over the medium term – this has implications for both Eskom and South Africa’s public finances more generally.

What the numbers say

In assessing government’s financial risk exposure to Eskom, National Treasury noted, as a positive factor, its recent recapitalization program and subsequent improvement in liquidity. Indeed, there might be reason for optimism in some of the numbers. These include a 10.5% increase in revenue as compared to the first six months of 2015/16, a 23% increase in earnings before interest, tax and depreciation and profits of R9.3 billion, and various cost reductions of some R14.4 billion. But symptoms of a deeper problem emerge when unpacking these numbers.

For example, revenue gains of some R21 billion were driven primarily by an increase in regulated tariffs. The problem is that Eskom has relied on significant year-on-year increases in tariffs since 2008. There is no guarantee this will continue, with flat – or decreasing – tariff and revenue scenarios more likely for the next few years. The reason for this comes from an understanding of Eskom’s regulatory environment. First, there’s a huge question mark over R11 billion of tariff increases allowed by the utility regulator for 2016/17. This has been set-aside by the High Court and sent back to the regulator for further review. On top of this, the effect of the court battle is that other important regulatory decisions have been parked until the matter is resolved. This alone has already delayed other decisions on some R40 billion of under-recovered costs dating back to 2014/15 due to mainly black townships not paying their services. . Whatever the amount finally awarded to Eskom – it isn’t likely to be reflected in tariffs until 2018/19, if at all.

MEANWHILE  Eskom concluded power supply agreements IN 2015 with its Zimbabwean and Zambian counterparts Zesa and Zesco respectively to supply up to 300MW of power during off-peak periods. Eskom is part of the Southern African Power Pool (SAPP), and so are Zesa and Zesco, where member utilities sell surplus electricity to each other depending on the need. While ll this “deals”  was on the table- South Africa has  experienced load shedding and black outs  for more than a year because there assumable were not enough electricity in the country to go around. Continuous tariff hikes were on the table as well- yet Eskom could sell electricity to neighboring countries at a rate far below what South Africans pay for it. .  While the power system was supposed to be unstable – they have been supplying both neighbouring countries under the standard agreements at peak and under the new bilateral agreement during off-peak hours and during peak when we have a surplus.

In Zambia, Eskom signed a power supply agreement with Zesco and an independent power producer Copperbelt who are both members of SAPP. Eskom has an existing agreement of supplying up to 50MW of power to Zambia. They  traded on a daily basis and have signed a bilateral agreement, which allowed them to supply up to 300MW off-peak and more than 50MW standard at peak, if they have more available.   South Africa, through Eskom, has been involved in the electricity sector in various countries in Africa for a long time and has utilized different forms of engagements. This has been done mainly through bilateral trading arrangements, using instruments such as Power Purchase and Power Sales Agreements. Eskom is also committed to ongoing participation in the Southern African Development Community (SADC) region through SAPP as an institution. SAPP is made up of South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe, connected through an integrated grid.   Participation in East and West Africa (Uganda and Mali respectively) has been undertaken through long-term Operating and Maintenance Concession Agreements. Yet South Africans still pay exuberant fees for their electricity supplies- and Eskom continuously are in deep financial dilemmas. “Apartheid’s” fault Mr. Quma- or YOUR regime’s incompetency  fault? How does this add up? Go Figure!