The association representing mining companies that contribute more than 7.5% to SA’s GDP and employ nearly 500,000 people has taken a dim view of the government’s decision to finance another expensive bailout of Eskom.
Instead, it says, the government should pave the way for the wholesale privatisation of the electricity sector.
The money earmarked for the National Treasury’s three-year, R254bn debt-relief package for Eskom could have been better spent providing South Africans with essential health, education and security services, the Minerals Council SA senior economist Bongani Motsa told parliament on Wednesday.
Hitting back at the concerns expressed by MPs during public hearings on the 2023 Eskom Debt Relief Bill, held by the select committee on appropriation, that the privatisation of Eskom would see a rise in electricity prices and derail rollout of electricity to those who still lacked access, Motsa said the government could allay these fears by looking at what happened in the telecommunications industry.
“Eskom is bleeding the fiscus [dry]. The privatisation of Eskom should happen as fast as possible. We should not be scared of privatisation,” he said.
The council’s suggestions presented in parliament include selling or concessioning all coal-fired power plants to the private sector, the concessioning of the transmission system to the private sector for a period of at least 15 to 20 years, and selling some disruption infrastructure owned by Eskom and municipalities to private sector operators.
“We can learn from the telecommunications industry, which has been predominantly privatised. There were also fears before the linearisation of this sector that cellphone charges will be too high and not affordable for many South Africans, but this has not been the case.”
Motsa said there were 90-million cellphone connections in SA, averaging at about 1.5 cellphones for every person, and pointing to the near universal access to telecommunication services in SA despite the sector having been privatised.
Nersa
In addition, the National Energy Regulator (Nersa) could continue to play a role in regulating electricity charges, similar to the role played by the Independent Communications Authority of SA in the telecommunications sector.
Motsa said Nersa could also set tariff conditions for private players that would commit them to bringing electricity access to the 10% to 15% of South Africans who still did not have electricity in their homes.
He said the Minerals Council was strongly opposed to a Treasury suggestion to write off the debt owed to Eskom by municipalities. Such a move presented “a moral hazard which will most likely worsen the problem of nonpayment in the future”.
Other measures should be explored to ensure that municipalities service their debt with Eskom, he said.
In a presentation to parliament earlier this week, Eskom interim CFO Martin Buys said debt owed by municipalities stood at R58bn and was expected to reach R66bn-R68bn by end-March 2024.
When finance minister Enoch Godongwana announced the Eskom debt-relief package during the national budget speech in parliament in February, he said that undertaking a debt relief of the magnitude the Treasury was suggesting without addressing the risk posed by municipal debt would be counterproductive. For this reason, the Treasury was considering a conditional debt write-off.
Labour federation Cosatu, which also made a presentation at the hearings, supported the move for the government to take over Eskom’s “unsustainable debt levels” as part of a package of measures to enable the utility to be “stabilised, rebuilt and play its intended role in the economy”. But Cosatu’s parliamentary coordinator Matthew Parks said the federation was worried by the suggestion to write off all monies owed by non-paying municipalities.
Parks said to end the rising levels of debt all customers should be moved to prepaid electricity and the government should determine which debt is recoverable and consider legal action to recover those debts.
Cosatu was “deeply concerned” about some of the conditions attached to the debt relief bill, in particular a prohibition on investing in new generation capacity. Parks said this made no sense as one of the fundamental causes of load-shedding was Eskom’s generation fleet nearing the end of its lifespan.
“To prevent load-shedding becoming a permanent feature of the economy, we need to not only fix existing generation infrastructure, but also invest in new generation capacity.”
The consequences of this condition would be that Eskom would continue to spend money on ageing infrastructure when it needed to move towards building new, modern, more efficient and less costly generation capacity if it was to survive as an entity, he said.
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