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Eskom at a sustainability ‘tipping point’, business and labour warn

Labour Minister Mildred Oliphant in conversation with Deputy President Cyril Ramaphosa at the Nedlac Summit

Photo by Duane Daws

Business Unity South Africa VP Martin Kingston

Photo by Duane Daws

Bheki Ntshalintshali

Photo by Duane Daws

8th September 2017

By: Terence Creamer

Creamer Media Editor

     

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Business and labour raised serious questions on Friday about the sustainability of State-owned electricity producer Eskom in light of its current governance failings, which were now undermining its financial health to the point where government could be forced to assist the utility in meeting its debt obligations.

The anxieties were aired at the twenty-second summit of the National Economic Development and Labour Council, which took place in Ekurhuleni.

Business Unity South Africa VP Martin Kingston said organised business was concerned that the electricity utility might be approaching a sustainability “tipping point”, describing as a national priority the need for the social partners to offer collective input on a “more sustainable path” for Eskom.

“Governance breaches have significantly eroded the financial viability of Eskom and the tariff structure and long-term price trajectory appear to be unsustainable,” Kingston warned.

To illustrate the point, he noted that Eskom needed to repay debt of more than R400-billion over the next five years. “We are concerned about the ability of government to stand behind Eskom’s obligations to meet any shortfall.”

Likewise, Congress of South African Trade Unions general-secretary Bheki Ntshalintshali said Eskom was now regarded as a “symbol of corruption and chaos”.

“We have seen collusion, rigged tenders, vendor financing and massive price hikes at the same time,” Ntshalintshali said.

Organised labour was equally concerned about “increased corruption, waste of resources and a lack of accountability” across a range State-owned companies (SOCs), including South African Airways (SAA) and the South African Broadcasting Corporation.

Ntshalintshali lamented the current perception that “crime does pay” at the SOCs and across the public and private sectors.

Meanwhile, Kingston said the state of South Africa’s SOCs, including their purpose, governance, sustainability and their financial viability were a significant worry for business. “This is no more starkly represented than the challenges faced by Eskom, which serves as a proxy for the health of this country.”

Business noted that the guarantees extended to SOCs by the National Treasury had the potential to worsen government’s debt-to-gross domestic product (GDP) ratio, which stood at nearly 51% in February.

“The combination of explicit guarantees and other forms of government support to SOCs increases this ratio by a further 10% of GDP. As we’ve seen in the recent case of SAA, the risk of default by SOCs is very real and could place our public finances under even more severe strain,” Kingston outlined.

CORRUPTION INFLECTION POINT

Deputy President Cyril Ramaphosa concurred that corruption and poor governance at State institutions was an impediment to growth and development and had also contributed to dragging business confidence to a 32-year low, which would undermine investment.

“We are only now beginning to understand the depth and the scale of corporate capture of public institutions and its devastating effect on the economy. While many are bewildered by the audacity of some of the alleged schemes, the dreadful reality is that the poor of this country have been made even poorer through the corruption that has been raging.”

Ramaphosa said the country was at an inflection point: “Either we confront corruption frontally, decisively and deliberately and thereby nurture the green shoots of an economic recovery, or we allow corrupt practices to continue unchecked and consign our people to poverty for generations.”

Edited by Creamer Media Reporter

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