Eskom Holdings will remain under control of the state, with Generation, Transmission and Distribution becoming separate units underneath. It’s a solution unlikely to find many passionate fans, with one side arguing it’s a dangerous move towards privatisation, and the other contending that this creates triple the headaches while maintaining all the problems.
President Ramaphosa’s announcement on Eskom’s restructuring was presented as “bold decisions and decisive action” on a state-owned entity which could present “devastating” problems down the road.
It follows Ramaphosa’s appointing of an Eskom sustainability task team in December 2018 which was required to submit its findings by the end of January. The eight-member team included University of Cape Town Professor Anton Eberhard, former Eskom CEO Brian Dames, and former National Union of Mineworkers (NUM) general secretary Frans Baleni.
Though the announcement of the split of the parastatal had been reported as a likely outcome, there was some confusion as to whether unions had been briefed ahead of SONA.
The ANC’s Paul Mashatile told journalists after SONA that unions had indeed been consulted, but the response from union leaders after the President’s address indicated significant unhappiness with the issue.
National Union of Metalworkers of South Africa (Numsa) general secretary tweeted:
“Numsa shall meet Cyril Ramaphosa in the street. We reject this breaking up of Eskom as it is nothing but the first phase to privatise Eskom.”
Cosatu president Zingiswa Losi, meanwhile, told SABC that the federation was worried about the implications of the restructuring for “low-end workers” and that no jobs should be lost as a result.
Ramaphosa said in his speech that “a process with labour, Eskom and other stakeholders” would be embarked upon “to work out the details of a just transition”.
Losi said that a “proper consultation” on the matter would be necessary.
“We hope there is no end game that has already been decided,” Losi said, in an apparent reference to the fear expressed by Jim that the restructuring was intended to culminate in full privatisation.
Indeed, it was noticeable that Ramaphosa’s speech did not include any reassurance that full privatisation was not on the table. Going into SONA, the President had been under enormous pressure to convince foreign investors that a sustainable solution to Eskom’s woes would be found as soon as possible.
Since the beginning of the year – at Davos, on a state visit to India and during this week’s Mining Indaba – Ramaphosa has been repeatedly confronted by the issue of Eskom as a significant stumbling block to unlocking further investment in South Africa.
In his address, he did not specify exactly what would happen in terms of Eskom’s existing debt, as well as its ongoing problem of municipal non-payment.
Ramaphosa said only that the “government will support Eskom’s balance sheet”, that Finance Minister Tito Mboweni would provide further details in his upcoming Budget Speech, and that support for the parastatal would not burden the fiscus with “unmanageable debt”.
He said that a greater rationale for splitting Eskom into three was that the separate entities would be able to raise funding with greater ease.
Crucially, however, Ramaphosa also indicated that consumer tariff hikes are on the horizon – though he termed the increases “affordable”.
Eskom CEO Phakamani Radebe – already no favourite of the unions – called the impending tariff increases a “very, very important” element of Eskom’s cost-cutting strategy.
The response from opposition parties to the Eskom announcement was, in the main, unenthusiastic.
DA leader Mmusi Maimane told journalists outside SONA that South Africans would be made to pay “more money” for Eskom’s historical mistakes.
A subsequent statement from the DA accused Ramaphosa of not going far enough in Eskom’s restructuring.
“These entities will still fall under the same holding company – Eskom – and South Africans will still pay for corruption and mismanagement at the bloated entity,” the DA said.
Some commentators pointed out, however, that Ramaphosa’s announcement closely followed a longstanding DA proposal to unbundle Eskom.
Former Gauteng premier Mbhazima Shilowa tweeted snidely:
“This neoliberal proposal of the DA – breaking Eskom into three units, is it still a neoliberal idea or is it now considered revolutionary after the announcement by the President?”
One of the most vocal critics of the plan was disgraced former Eskom acting CEO Matshela Koko.
“This will not improve Eskom sales volume,” Koko tweeted. “Neither will it reduce the finance costs and the primary energy costs that are running away. So why is this done? It is to prepare Eskom for partial privatisation.”
The Eskom announcement was one of the parts of Ramaphosa’s SONA address which received the most enthusiastic applause from the National Assembly.
There is every indication, however, that the President will struggle to get his union alliance partners on board with the plan – potential disunity that Ramaphosa can ill afford three months ahead of the elections.
Not for the first time, Ramaphosa may find that simultaneously appeasing local unions and winning the hearts of foreign investors requires a tightrope act of significant difficulty.
Some Eskom staff members took to social media after SONA to express their own concerns about the safety of their jobs in the wake of the announcement. If strike action is on the cards, South Africans may find themselves plunged into darkness once more. DM
Sheep wool never sheds.