Cyril Ramaphosa shoots down claims of Eskom privatisation_1

President Cyril Ramaphosa has gone on record to state that while the easy way out of a colossal financial mess was to sell Eskom, he still believed that his government could pull the power utility out of the rut.

The scale of Eskom's troubles is documented in Paul Burkhardt and Michael Cohen's latest contribution to Bloomberg News. In this piece, Burkhardt and Cohen properly detail the reason why the Medupi and Kusile — referred to now as Bravo — power plants will cripple South Africa's economy for, at least, the next three years.

Basically, the R163.2-billion mammoth infrastructure project is the key reason why, every now and then, National Treasury is forced to hand out bailout billions.

However, despite being aware of this, Ramaphosa has insisted on leaving the responsibility of turning the tide at the power utility in the hands of the government.

Ramaphosa: Eskom will not be privatised

Speaking at Thursday's NCOP Q'A session, the president made assertions about the future of Eskom. He revealed that the power utility has made improvements in containing enough coal reserves to ensure the output of electricity at a rate above the minimum 20 days.

However, he admitted that despite the bailout totalling R128-billion that Eskom is set to receive from Treasury in the next three financial years, the power utility has struggled to sustain "operating costs caused by expensive coal contracts [and] a high headcount".

Instead of selling Eskom off, Ramaphosa proposed that it will be best to 'partner' with the private sector in some departments.

"Over and above the financial recovery, the newly-appointed Chief Restructuring Officer is developing potential solutions for Eskom's debt. The process to appoint a new Group CEO will soon be concluded.
"The Board of Directors will be strengthened with additional members with the relevant technical expertise to lead the turn around at Eskom," he said.

Power utility set to challenge Nersa electricity increase

The power utility's inability to sustain operating costs is largely due to its poor debt recovery record. People are just not paying for electricity.

As a result, the power utility has decided to take the National Energy Regulator of South Africa (Nersa), to court, in a bid to challenge the approved electricity increases for the next three financial years.

“This resulted in the return on assets in the decision being approximately negative 1% for each of the financial years,” the utility explained.

Eskom noted in a statement that this is a push to improve the utility's return on capital.

"The Electricity Regulation Act requires NERSA to set revenues such that it would be reflective of prudent and efficient costs, including a reasonable return on capital,” the statement read.