Eskom’s dying glimmer

Source: Pixabay
Source: Pixabay

In a recent national address, current Eskom CEO Tshediso Matona announced that load shedding was set to continue for the next 18 months. Despite his apology for the inconvenience, the message was as clear as day: South Africa’s economy would continue to be in jeopardy until Eskom had sorted its bag full of shambles.

Established in 1923, Eskom was initially conceived as a utility that would prevent South Africa from having to rely on importing power from neighbouring states. Over time, it would come to generate 95% of South Africa’s electricity and supply approximately 45% of Africa’s electricity.

Eskom managed to keep up with electricity demand into the early 2000s, but leaders in government and Eskom predicted that the grid would need to be expanded sooner rather than later. By 2007, years after not having invested enough in renewable energy and new power plants, the parastatal was forced to plunge the nation into darkness with planned power outages, more commonly known as load shedding.

This would be the first of many signs of severe strain on Eskom’s grid and its inability to keep up with the national demand for power. Following rolling blackouts up until May 2008, the power utility committed to construct and commission new plants.

Over time, the more frequent Eskom would implement load shedding, the more its cracks would begin to show. Eskom managed to increase its coal reserves, patched up the holes in its maintenance issues and started construction on new power plants. It then suspended load shedding for the next few years, until the patches inevitably tore.

Flickering lights

Failure to meet deadlines on major projects led to further load shedding in November 2014, the most severe of which was experienced a few days ago. Eskom load shedding schedules consist of various ‘stages’ ranging from one to three, which indicate how many areas in a particular locale are affected by the outage.

According to reports by Carte Blanche, the electricity crisis is not only a result of increased demand, but also “deferred maintenance over extended periods of time.”

Duvha power station was the first to break down, as a result of a “pressurisation incident,” said Andrew Etzinger, Eskom spokesperson. Following this, a silo at Majuba power station collapsed in November, with an additional silo at the station showing signs of wear and tear.

There are two further unfinished plants, Medupi and Kusile, which according to energy expert Chris Yelland are running ten years behind schedule. These delays have often been attributed to labour strikes and poor administration. While Medupi is scheduled to start generating commercial power in June, the delivery date for Kusile has still not been announced.

Non-payment of contracts by Eskom has certainly not helped, with contractors claiming that the utility has defaulted on payments.

In early November 2014, international credit rating agency Moody’s downgraded Eskom’s rating to junk status, making it more expensive to borrow, and making it even harder for the utility to make up for its current revenue shortfall of over 200 billion rand. This inevitably spells an increase in electricity tariffs for consumers in a bid to recover as much as possible and in a short space of time.

Big pay, poor performance

Adding insult to this non-payment of contracts are the exorbitant bonuses doled out to Eskom executives over the years. A total of R60 million is reported to have been paid out to these executives, with three of the top executive directors taking home 40% of this amount for the last financial year. Eskom has also been well-known for its executive shedding, through constant change of CEOs particularly from 2007 and onwards, ironically, at the start of the electricity crisis.

From 2002 to 2007, under the leadership of Thulani Gcabashe, the power utility managed to stay relatively stable, but this particular time was crucial to preventing the current power crisis, as government had already been aware of the need to ramp up electricity production for an ever-growing population.

By the time Gcabashe’s six-year term was over and Jacob Maroga stepped in for the next four years, the power utility was deep into a leadership crisis. Eskom’s reputation was further dragged down after Maroga decided to take Eskom to court and sue for R85 million after resigning from his post. This was following allegations of failure to fulfil his leadership duties, including rectifying the utility’s coal procurement practices, which contributed to the country’s decline in coal supply.

ESKOM_FEATURE

Brian Dames, who stepped in as CEO in 2010, faced another setback in 2011 with the delay of the 4,764-megawatt Medupi power station. This plant was scheduled to start contributing to the national grid in 2012. The power station was then scheduled to start generation in December 2013, only for its construction workers to go on strike, destabilising the timeline for operation once again. The power station was then set to join the national grid at the end of this year, but the wait still continues.

Despite the frequent occurrence of rolling blackouts throughout the country, Eskom executives have vehemently denied that the parastatal is experiencing a crisis.

Eskom has attempted to justify its excessive pay-outs by making comparisons with executives in other industries, along with the fact that it has most recently reported a R9.3-billion profit.

No light at the end of the tunnel

The profits achieved by Eskom are, however, a diversion to a deepening financial crunch. Profits have decreased by 24% over the past year, while municipalities are still deeply indebted to Eskom – to the tune of R10.8 billion, if Co-operative Governance Minister Pravin Gordhan is to be believed.

There have also been reports that the utility is negotiating with a number of banks to secure a loan of $1 billion in order to finance additional developments. 2015 could also see electricity tariffs increase by up to 14% as the utility desperately scrambles to recover missing revenues.

The latest estimates suggest that regular power supply will only be restored by March next year, with load shedding expected to take place on 36 days over the next three months. Albeit more moderate, there is the further risk of load shedding on 59 days during this time.

Do you think the end is in sight for the power crisis? Let us know in the comments section below.

Sources: Carte Blanche, TimesLIVE, BusinessTech

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