Eskom CEO sends a message to President Ramaphosa

The head of South Africa’s state power utility, Eskom, said a government plan to spin off its transmission assets needs to be implemented in a way that is sustainable for the company.

Eskom CEO Dan Marokane had welcomed an announcement in December by the nation’s electricity minister that the utility would retain ownership of the national network of power lines, its most profitable division. 

That plan was overruled in February by South African President Cyril Ramaphosa, who said the assets would be fully separated to support a broader process to liberalise the grid, bringing in private producers and traders. 

“We were clear about what we thought was right for the business and what we thought was right for the country, and the president thought otherwise,” Marokane said in an interview at Bloomberg’s Cape Town offices last week.

“The decision has been taken that we go in this way, and the decision also says conditional on the sustainability of the entity.”

Ramaphosa instructed a task team to research how best to separate the transmission unit into an independent system operator.

The team’s deadline to submit a preliminary report was extended to the end of June, with a more detailed version to follow three months later.

Additional delays and changes in policy could further prolong the state’s broader unbundling of Eskom into generation, distribution and transmission units.

This comes from a decision taken years ago in the midst of rolling outages due to mismanagement and poor maintenance at the utility.

Moody’s Ratings has warned that the separation process will be complex and could weaken the utility’s business risk profile.  

“These are no different points of concern than the ones that we had raised before, so the task team has got a responsibility to go to the president and say, this is how we’ll do it,” Marokane said.

“The litmus test is going to be on the sustainability component of the answer that will be placed on the table. The task team will lead us to an answer one way or another.”

Lobby group Business Leadership South Africa said it was imperative that an independent transmission system operator be established and that it serves as a neutral intermediary that provides access to the grid.

“This intermediary must own the grid’s assets, not merely operate them on Eskom’s behalf,” Busisiwe Mavuso, the group’s chief executive officer, said in her weekly column on Monday.

“Ownership matters because it removes any possibility that the entity running the network could favour itself or a related party over competitors.”