Eskom needs to open its generation business to private operators

There is a level of pragmatism underneath the frustration felt by mining company executives towards Eskom. While the criticism levelled at Eskom’s board for its management of SA’s most critical business is unequivocal and the annoyance palpable, there is no stampede by mining company executives to remove themselves from the grid.

The alternatives are expensive and unreliable in the case of renewable energy options. The size and cost of solar arrays to power mines and processing plants makes this option one that would need offtake for two or three decades.

Years ago major mining companies such as Anglo American and Xstrata (now taken over by Glencore), which had large coal businesses, spoke to Eskom and the government about setting up independent power producers, putting electricity into the grid as well as securing reliable and cost-effective power for their energy intensive businesses like smelting and refining platinum group metals or producing ferrochrome. Those talks went nowhere and the plans were shelved with no intention of reviving them.

Since the notification from Eskom to the mining industry in February 2008 that it could not guarantee power to mines, leading to underground mines stalling production until that guarantee could be provided, mining companies have cut out as much electricity consumption as possible.

While executives talk of investigating options to set up power generating capacity for their mines, there is the deep-seated realisation if they take their operations off the grid, the problems at Eskom will be exacerbated as key customers find alternatives, depriving Eskom of steady revenue.

Eskom needs to open its generation business to private operators, which could go a long way to fixing the problem. Eskom has clearly proved itself utterly incapable of project management and execution, as evidenced by the unfolding fiascoes at the new, massively overbudget and delayed Medupi and Khusile power stations.

Competition in business is good for consumers. And in the case of MultiChoice’s DStv subscribers, competition has delivered a sweeter 2019. The satellite TV operator announced that it is freezing price increases for the top-end and cheapest bouquets this year.

At the top of the range, DStv charges a hefty R809 for a premium subscription. For years DStv could get away with increasing the premium subscription fee without much consideration until on demand video and streaming services arrived to eat its lunch.

MultiChoice CEO Calvo Mawela has openly admitted that Netflix is hurting its DStv premium subscription base. DStv said it lost more than 100,000 premium subscribers in the 2017 financial year.

But instead of going back to the drawing board to revise DStv’s uncompetitive pricing, Mawela called for regulation of Netflix, saying it had an unfair advantage as did not have to pay tax or comply with black economic empowerment regulations.

The thought of paying over R800 a month and an additional “access” fee to record shows, as well as another to get on-demand video services is clearly not sitting well with customers, even with those who can still comfortably afford it. A study by market research firm, Growth from Knowledge last year showed that about 20% of South Africans who have subscribed for the video-on-demand service planned to cancel their pay television subscription.

It also noted that South African consumers are already spending more than a third of their viewing time watching free videos on social networks.

MultiChoice might have taken some pointers from that research but it remains to be seen if the price freeze on premium and below-inflation increases on other bouquets announced on Wednesday will slow the subscriber exodus.