Business, Media, Politics

Sake24 wins right to see Eskom’s secret tariffs

By Phillip De Wet 5 August 2011

Unless BHP Billiton appeals (which it almost certainly will) and wins (which it hopefully won't), Eskom will have to disclose all the details of sweetheart deals dating from the 1990s that are costing it billions – and were possibly partially responsible for the 2008 blackouts. While that information could be damning for some, more importantly is the firm trend being set by such cases - information that is in the public interest will out, eventually, even if it takes decades. By PHILLIP DE WET.

It’s taken more than two years, but the business section of Naspers’ newspaper unit on Friday finally won the right to see how much BHP Billiton pays for some of its electricity, how those prices are calculated and who signed off on the deals. For now, that is. BHP has to confirm that it will appeal the judgment – which it is almost certain to do, adding another couple of years to the waiting time.

If it does appeal, BHP will find Sake24 waiting for it. “We’re not going away,” says editor Ryk van Niekerk. “We think this is a case with a heavy weight of public interest, with poor people seeing enormous hikes in [electricity] prices that are used to subsidise a multinational company.”

Some of the details Sake24 is seeking have become academic, but it believes there are still enough juicy titbits buried to justify a decent article or two. If it loses on appeal it could well turn to Constitutional argument, as it promised to do if this initial judgment went against it. The case is a strong one, and it seems pretty certain that the secrets BHP is so very keen to protect will ultimately be revealed.

And while that won’t undo the damage already inflicted, it could at least prevent similar mistakes in future.

Somewhere in the 1990s – nobody will yet say exactly when – Eskom gave the resources company now known as BHP Billiton a gift that keeps on giving: cut-rate electricity for two of its power-guzzling smelters, with those prices, or at least the formula by which they are calculated, guaranteed until the far-future date of 2026.

At the time it was sweet for both sides. South Africa had more electricity than it knew how to use, and was effectively transmuting that into jobs and foreign currency flows by way of aluminium. BHP, we think, in the absence of the actual formula, was guaranteed profits on the massive investment in those smelters thanks to the fact that electricity costs make up a huge proportion of the price of making aluminium.

Fast-forward to 2008, though, and only BHP was still enjoying the fruits of the deal. Because of the many townships and rural areas that had been connected to the grid in the meanwhile, some not-insignificant growth in the economy, and planning so pathetic it verges on criminal, SA had run out of electricity. Blackouts (or “load shedding”, as Eskom would prefer it to be euphemistically known) brought mining to a halt, closed down factories, made businesses of every type install backup generators, caused traffic snarl-ups, interrupted surgeries and generally caused enough trouble that it is hard to imagine the benefits from BHP’s smelters were still being felt. Then a panicky country committed to a rapid and massive build-out of power stations and started trying to cut down on consumption at the same time, further adding to the burden.

We now know that the two BHP smelters in question were using almost exactly as much electricity as SA needed to avoid those blackouts. While cutting them off would have been calamitous for the company, it could have prevented every other Eskom customer, every citizen and business, from sitting in the dark. Thanks to the secret contracts Sake24 wants to see and be made public, though, the supply to the smelters was safe. And cheap. It’s an open secret that BHP was paying around half what it cost to generate the electricity the smelters were consuming, leading to losses that can only be measured in billions of rands.

Sake24 doesn’t think corruption was at the root of that. Conflicts of interest, maybe, but not corruption. What it mostly wants are the figures that will allow it to calculate how big a profit BHP turned at the expense of taxpayers. So it submitted an application to Eskom in terms of the Promotion of Access to Information Act (Paia), a piece of legislation that has proven most useful to investigative publications.

Though that application was made to Eskom, the parastatal ended up being a proxy in what became a fight between Sake24 and BHP Billiton. Eskom, South Gauteng high court Judge Frans Kgomo ruled on Friday, was simply “feebly advancing submissions and arguments” while “being nudged from behind by Billiton”. The resources group argued that Eskom owed it a duty of confidentiality, and told the court that it would suffer commercially if customers and competitors learnt how much it costs to make aluminium.

In normal circumstances those would make for a valid defence, but Paia has a public-interest override: If laws could have been broken, or if there are “imminent and serious public safety or environmental” risks, then issues of commercial impact or secrecy agreements fall by the wayside.

Nobody argues that any laws were broken, but in a broad interpretation of what constitutes a safety or environmental risk, Judge Kgomo found Billiton did not have the right to secrecy. People left without electricity may burn coal instead, he said, and that could lead to lung trouble, for example, or even death. Trains that can’t run because there is no electricity could also make commuting workers late, he found, with economic impacts that can’t be ignored.

Following the consequences in that way could make for an interesting precedent. Various courts have already ruled that newspapers or civil society can follow tender money pretty much anywhere in search for corruption, and that questions about the finances of public figures (such as Julius Malema) are a warranted invasion of privacy. There are cases, however, where private companies spend public money or public bodies award non-competitive tenders with only the headline figures not shrouded in secrecy. In the absence of possible corruption it is hard to get insight into such cases. But what if there are suspicions of simple inefficiency? With money that could have been used to build houses (which could keep out the rain, which could have prevented illness) wasted?

Perhaps such information will now more easily flow into the public domain. As, perhaps, we’ll know the details of the Eskom/BHP deal before 2013, when Eskom is due to supply even more electricity to the smelters, if they still want it under new prices that will hopefully have been renegotiated by then. Eskom will not contest this decision, spokeswoman Hillary Joffe said, “but we’ll have to await the outcome” if BHP Billiton does appeal. Eventually, though, it seems we’ll know the entire truth. It may be years too late, but at least we’ll know. And, as a result of the processes involved, keep us knowing in the future. DM

 


 

Photo: Eskom

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