CAROL PATON: Eskom is the big bid in Ramapolitics

Will Eskom be Cyril Ramaphosa’s Gear, or will it be the crowning victory of his brand of social compacting politics?

The announcement on Thursday that Eskom will be split into three parts is the single biggest economic reform since the democratic government restructured public finances in the late 90s.

Those reforms — described in part by the acronym Gear, which stood for growth, employment and redistribution — became known as “the 1996 class project” by the labour movement and the left generally, and were widely regarded as an assault by the democratic government on workers and poor communities. That is because in stabilising the macroeconomic environment, Gear reined in the budget deficit, dashing hopes for a huge expansion of social spending. Gear was also the precursor to the start of plans to corporatise and privatise state-owned entities.

Gear was moderately successful. The stable investment environment laid the basis for a decade of growth, though job creation was not as robust as had been hoped. But it was deeply resented by labour and remains one of the key reasons trade unions still approach social compacting with the government with such deep suspicion.

Labour is vehemently against the Eskom break-up proposal. While splitting off three companies — a generation company that will own Eskom’s power stations; a transmission company that will own and operate the national electricity grid; and a third that will own the distribution assets, such as substations — will not in itself lead directly to job losses; it will open the way for two crucial processes.

With a clear line of sight on the costs and revenue of each division, it will be far easier to introduce productivity gains and efficiencies. Secondly, the split will lay the basis for a new, competitive energy market.

Because it is intended that the grid company be independent, it will have the incentive to buy electricity from the cheapest provider. That will in future undoubtedly be wind and solar generated energy. Those producers are more likely than not to be privately owned, given the way the industry is evolving and Eskom’s inability to enter into more capital projects in the immediate future.

—  To make it work will require an imaginative approach that will deliver real and substantial benefits to labour.

The energy transition from coal to renewable energy will be suddenly accelerated. All of this points to a declining role for Eskom, for coal-generated energy and coal mines themselves.

Splitting Eskom is therefore easily the most politically controversial thing Ramaphosa could do, and he knows he will face huge opposition. That is why in his state of the nation address Ramaphosa promised a “just transition” and credible and sustainable plans to deal with the needs of all those affected.

To make it work will require an imaginative approach that will deliver real and substantial benefits to labour. Generalised promises of growth and employment gains are not going to cut it.

In tackling this problem SA is not alone. Close to 90 countries have broken up what were, like Eskom, their vertically integrated power utilities. Many other countries in the world are transitioning away from coal power and coal mining for reasons of climate change and pressure from citizens for clean energy. Some, such as Spain, have struck grand bargains with labour to protect jobs, in which substantial funding is transferred to mineworkers and mining communities and investments in renewable energy are concentrated in former mining communities.

Several of Eskom’s older power stations are ailing, with a significant number already closed down. It would be in Eskom’s financial interests to accelerate their closure, economic and financial analysis has shown. But with no evidence of a plan for workers in sight unions are mobilising against the transition.

Several unions are already campaigning against independent power producers with marches and in court. The National Union of Metalworkers of SA, for instance, tried to interdict last year’s signing of agreements between Eskom and independent power producers. Numsa is actively involved in campaigns with Jacob Zuma-aligned splinter groups that disseminate propaganda about independent power producers on the internet and on chat groups.

Like all political battles, ideas and messaging will play a large part in whether a deal can be struck. So far, the Zuma-Numsa-former Eskom officials nexus is leading on that score. Workers have been told not to trust independent power producers, Ramaphosa, public enterprises minister Pravin Gordhan, and most of all Eskom. As well as structuring a tangible deal for workers, Ramaphosa needs to crank up the hearts and minds campaign urgently to make sure his ideas get a fair hearing.

• Paton is writer-at-large.