Eskom is being privatised

Efficient Group chief economist Dawie Roodt said a closer analysis of the finance minister’s 2023 budget indicates that a “back-door kind of privatisation” is occurring at Eskom and other state-owned enterprises (SOEs). 

In his budget speech, finance minister Enoch Godongwana outlined the conditions for Eskom to receive its debt relief: 

• Eskom must prioritise capital expenditure in transmission and distribution.
• Eskom must focus on the maintenance of its existing generation fleet to increase energy availability.
• The relief is only to be used to settle debt and interest payments.
• Eskom must implement the recommendations from an independent assessment of its operations which the Treasury has commissioned.

In the budget, a further condition is stated and the independent commission’s scope and power are explained. 

“Eskom, National Treasury, and the Department of Public Enterprises have agreed to design a mechanism for building new transmission infrastructure that will allow for extensive private sector participation in the development of the transmission network,” it said.

It indicates that Eskom’s transmission network will, effectively, be privatised if it wants to receive Treasury’s debt relief. 

The international commission will independently assess Eskom’s operations and “review all plants in Eskom’s coal fleet and advise on operational improvements”. 

Eskom will be “required to implement the operational recommendations” of this assessment as a condition of receiving debt relief. 

The commission will identify which Eskom plants can “be resuscitated to original equipment manufacturers’ standards”.

What will happen to the plants that cannot be resuscitated is unclear. 

Following this assessment, “Eskom must concession all these power stations with clear targets for the electricity availability factor and operations”, said the budget. 

Roodt said these measures “are effectively busy privatising Eskom”. While the minister cannot say this explicitly with an election looming, private sector participation is officially a prerequisite for Eskom to receive its debt bailout.

Eskom, for Roodt, is “simply dying”. The private sector is taking over electricity generation, followed by transmission shortly afterwards.

Private sector still not doing enough – PwC

Numerous private power projects are underway but PwC said the private sector is still not doing enough to solve South Africa’s electricity supply issues.

This is partly due to red tape and politicking preventing the creation of a competitive electricity market where there are multiple suppliers from which municipalities can buy electricity. 

There is also no clarity on selling and feeding excess electricity produced by renewable systems back into the grid. This would have been a better incentive than the 25% rebate for households, according to PwC. 

The creation of a competitive electricity market seems to be the government’s end-goal, with deputy finance minister David Masondo saying, “Treasury does not support state monopoly in the energy sector”. 

Cas Coovadia, CEO of Business Unity South Africa, agrees with PwC and Masondo and called for the private sector to be more proactive in forcing the agenda. 

Coovadia and PwC agree that the solar incentives will have a tangible impact on load-shedding, but solar generation will have to be bolstered with other energy sources. 

Coal will be a part of South Africa’s energy mix for decades, according to Roodt, and it is still important to ensure those plants are operating effectively. 

The ministry of finance responded to these reactions to the budget by saying that “the government has no intention to privatise Eskom”.