TIM COHEN: Plan A failed, so Brian Molefe is back at Eskom

Eskom. Oh, Eskom. What a dire, comprehensive disaster. Some colleagues and I had lunch last week with a leading South African corporation and we were told discreetly they had received correspondence from Eskom asking them to use more power. But alas, the company has long since made its own arrangements.

This act constitutes a complete turnaround for Eskom, which a few years ago was begging companies to use less power. I understand the utility is so desperate, it has even started selling electricity to Zimbabwe again, which the Zimbabweans are again not paying for. It would be funny if it weren’t so tragic.

The shortened version of Eskom’s recent history is that it ran out of capacity in 2008, when the economy was growing strongly and, consequently, it and the government panicked and commissioned two huge new coal plants, Kusile and Medupi.

The costs of those plants exploded, which required ever more and ever larger electricity price hikes.

Not untypically, just as the big, shiny new coal plants are coming on line, the economy has performed so badly that the new power is really not necessary — at least for the moment.

The cost of electricity is now so high that companies, citizens and even government institutions are desperately trying to find ways to use less power, which they can now do with advances in technology. As a result, Eskom is haemorrhaging cash and, notwithstanding a government guarantee, its ballooning debt is now much more expensive, compounding its problems. Sensing disaster, chunks of its experienced technical staff have left and its existing staff are desperately trying to grab, legally or otherwise, what remains before the ship sinks.

The numbers tell their own story. Since the big power outages in 2008, electricity prices have increased in each successive year by 27.5%, 31.3%, 24.8%, 25.8%, 16%, 8%, 8%, 9.4% and 2.2%. Note the very small increase in 2016; even if Eskom hasn’t noticed, the National Energy Regulator of SA is clearly worried that electricity as a product is losing favour among customers. That would be us.

And not surprising. These amounts are compounded, of course, but inflation has to be factored in too to get to the real effect. Overall, the net effect is that electricity prices have increased 168% in real terms over the past eight years, according to a parliamentary report. In that time, Eskom’s electricity production has been more or less flat. And in that time, SA has grown overall, so logically Eskom’s rate of electricity production as a proportion of overall GDP has declined.

This decline is not surprising. In fact, it’s surprising it hasn’t declined more. If you double your price you shouldn’t be surprised if your customers buy less. What is surprising is that in this period, Eskom’s real-term debt has increased from about R50bn in 2007, to about R200bn today. It’s the kind of figure you have to let sink in a bit. So Eskom has spent R200bn on new power plants and is generating precisely zero more electricity.

This is not even the most shocking part. Eskom debt is due to hit R330bn over the next five years and that requires borrowing about R68bn more a year until the end of that period.

I’m willing to bet this was not Public Enterprises Minister Lynne Brown's decision; her justifications were so illogical, especially since she was the one who blocked Molefe’s R30m payout

Eskom will argue that it is still showing a healthy profit. The problem is that there is an irony here: as the Medupi and Kusile projects come online, it’s no longer possible to capitalise the finance costs. If you take that all in, it’s hardly surprising that Eskom has been downgraded faster than SA itself.

So, in these circumstances, the government obviously needs to find absolutely credible leadership — someone beyond reproach, experienced, a turnaround artist. So who does it look to? Brian Molefe, the man who left Eskom in tears after his role in handing a supplier coal mine and huge coal contracts to a foreign business organisation and the president’s son became apparent. Because that’s really going to help.

Watching Public Enterprises Minister Lynne Brown announce the decision last week was one more bizarre moment in South African politics — and that’s saying something. I don’t know her, but I’m willing to bet this was not her decision; her justifications were so illogical, especially since she was the one who blocked Molefe’s R30m payout.

Here’s what I think happened. Molefe was ushered into Parliament with the intention he would become the new finance minister, but this turned out to be impossible because even President Jacob Zuma’s supporters saw how badly that would play politically. At the last minute, Zuma was persuaded not to go that route. But Molefe did not go to Parliament to be a backbencher — so Zuma’s backers hatched a new plan: send him back to Eskom. He was so useful there — and he backs nuclear.

Simple as that.