JABULANI SIKHAKHANE: Questions remain over plan for troubled Eskom

The government’s story on the troubled Eskom doesn’t cohere. It’s not clear how President Cyril Ramaphosa’s plan for the utility, which is centred on the new minister of electricity, joins up or will be co-ordinated with the new initiative led by finance minister Enoch Godongwana.

If the two initiatives do join up, Ramaphosa and Godongwana have not explained how and where they will do so, a major oversight at a time of national crisis, bearing in mind that the government has a reputation for poor co-ordination of its activities.

But what’s clear from all the announcements is that all of the initiatives will converge on Eskom’s board of directors, a development that will demand of the board to keep their  fiduciary duties (what’s in the best interests of Eskom) uppermost in their collective mind as they deal directly with three politicians.

Ramaphosa has said he will appoint a minister of electricity to be based in the presidency “to deal more effectively and urgently with the challenges that confront us”. The new minister’s sole focus will be to oversee “all aspects of the electricity crisis response, including the work of the National Energy Crisis Committee”.

“The minister will focus full-time and work with the Eskom board and management on ending load-shedding and ensuring that the Energy Action Plan is implemented without delay,” said Ramaphosa.

By the time the president made his announcement he knew, or ought to have known, what Godongwana would announce on government’s debt relief arrangements for Eskom. Yet he didn’t say how the two would join up.

In short, the government plans to take more than R254bn worth of Eskom debt. This will involve the government paying off R184bn of Eskom bonds over the next three years and taking onto its books another R70bn in 2025/2026.

This assistance comes with conditions, including that Eskom implement the recommendations that came from an assessment of Eskom operations commissioned by the Treasury. The department of public enterprises and the Treasury will, according to an annexure to the 2023 Budget Review, work together to drive this process as well as Eskom’s compliance with other conditions of the debt relief.

The Treasury documents and Godongwana’s speech don’t mention what role the minister of electricity will play in this, or how the Treasury or finance minister will work with the new minister. Nor do they refer to the National Energy Crisis Committee, which was created to co-ordinate the government’s response to the energy crisis and oversee the implementation of Ramaphosa’s Energy Action Plan.

The annexure on Eskom debt relief says public enterprises and the Treasury have agreed on “various operational conditions that Eskom is required to implement”. These will be added to Eskom’s corporate plan, which will be overseen by the utility’s board of directors.

The key condition is that Eskom must restrict its capital expenditure to its transmission and distribution businesses, and not generation. “The only capital expenditure that may be undertaken for generation relates to minimum emissions standards, flue-gas desulfurisation and required maintenance. No other greenfield generation projects will be allowed during the debt-relief period.”

Both Ramaphosa’s crisis committee and the Treasury have commissioned independent assessments of Eskom operations. Ramaphosa said in January that “a team of independent experts has been established to work closely with Eskom to diagnose the problems at poorly performing power stations” and take steps to improve the performance of the stations.

The Treasury, according to Godongwana’s budget speech, has also commissioned “an independent assessment” of Eskom operations. This appears to be over and above the various operational conditions the Treasury and public enterprises have agreed Eskom must incorporate into its corporate plan.

Clearly, Ramaphosa’s initiative will overlap with the process driven by Godongwana, specifically when it comes to matters dealing with Eskom operation. However, the two have not made clear how they will co-ordinate and resolve any clashes. There’s also the role of public enterprises.

Ramaphosa was fairly specific in his speech, limiting the role of the public enterprises ministry to being the shareholder representative of Eskom, steering the restructuring of Eskom, ensuring the establishment of the transmission company, overseeing the implementation of the just energy transition programme, and overseeing the establishment of the SOE Holding Company.

For sure, one can fit Eskom operations under the umbrella of shareholder representative’s role. However, given the financial, operational and governance wreck Eskom is, it would have been better had Ramaphosa and Godongwana been specific on how they see their initiatives joining up or diverging in action. Failure to co-ordinate all these initiatives will end up piling too much pressure on the Eskom board and management, with disastrous consequences.

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.