The energy sector cannot continue to be dominated by one state-owned monopoly which has caused a lot of the problems facing the country, deputy finance minister David Masondo said in parliament Thursday.
Treasury has proposed that some of Eskom’s coal-fired power stations be concessioned to private sector operators.
The proposal, made in the budget tabled by finance minister Enoch Godongwana in parliament on Wednesday, is tied in with the R254bn debt relief package for Eskom.
The minister has ordered a consortium of international experts to review all Eskom’s coal-fired power stations and advise on improving their operations by mid-2023. Those power stations that the consortium determines can be restored to original equipment manufacturers’ specifications could be considered for concessioning once the process is completed.
The move could see Eskom exit power generation altogether. Godongwana conceded that it still needs to gain consensus over the whole of government, and concessioning does not necessarily mean selling power stations.
Concessioning of power stations is likely to confront pushback by opponents including by some in the ANC who will see it as a form of privatisation of the energy sector.
The first signs of the pushback came from EFF deputy president Floyd Shivambu during a meeting of four of parliament’s finance and appropriation committees on Thursday when Godongwana and members of the Treasury team briefed MPs on the budget.
Shivambu criticised what he said was Treasury’s “obsession” with the privatisation of electricity generation, leaving Eskom with responsibility only for transmission and distribution. He said the private sector had not come to the party in terms of renewable energy generation, so the question was where the electricity generation was going to come from for Eskom to transmit.
Masondo noted that among the conditions attached to the debt relief is that Eskom improve its plant performance. It will be permitted to invest only in transmission and distribution, and in reducing emissions and doing required maintenance.
“I do think we need to distinguish two things. One is liberalisation of the sector so that it is not dominated by one monopoly. That is to be distinguished from privatisation,” he said.
No-one company, whether state or private, should dominate the sector “because relying on one company, we have seen what it has done to the economy”, Masondo said.
“It poses a huge systemic risk not only for business but also for households which are experiencing load-shedding. We relied on one energy company which has generated a lot of problems.
“What we have been doing as government is to liberalise the sector. There is no intention to privatise the strategic assets of Eskom. Eskom will still play a critical role in the generation of energy. It’s a question of not only relying on Eskom to generate energy for the economy.”
Masondo noted that many countries were also liberalising their energy sectors as they realised the dangers of relying on one monopoly for energy generation.
He referred to the Electricity Regulation Amendment Bill that seeks to establish a competitive electricity market so that there are multiple generators of energy. The bill provides for the establishment of an independent transmission company and the emergence of a competitive electricity market.
“It doesn’t mean that Eskom will be sold out. Eskom will still play a part in energy generation but it has to compete with other generators. There is no intention to privatise Eskom from energy generation,” Masondo said.
Treasury will have to look at the recommendations emerging from the assessment by the team it has put together to look at each plant.
Masondo said government also had to look at the possibility of Eskom getting rid of noncore assets that are not linked to generation, transmission or distribution of energy, such as the Eskom Finance Company which provides insurance agent and broker services for a range of insurance types.
He also said measures had been proposed to make it easier for SMMEs to invest in renewables through the so-called bounce back credit guarantee scheme that would enable them to borrow money to invest in renewables.
Earlier, Godongwana told the meeting, without providing details, that outgoing Eskom CEO Andre de Ruyter had been “economic with the truth” regarding his comments on criminal syndicates in Eskom.
De Ruyter has been forced to leave Eskom at the end of the month and not serve out his full notice period because of his allegations in a television interview that an ANC MP was involved in corruption in Eskom.
Godongwana said when De Ruyter had raised this issue with government, particularly the corruption in Mpumalanga, an investigation was done which found that there were some syndicates that were active, which included members of SAPS.
“What government did was to set up a task team composed of all the law enforcement agencies which have arrested a number of people,” he said.
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