In his budget speech next week, the Minister of Finance will detail the
measures that government will undertake to assist Eskom to stabilise
its finances. It represents a significant commitment at a time when
public finances are severely constrained.
As political parties and as leaders, we must desist from statements that demean or insult or offend other races, other languages, other religions or other groups. We agree with the Hon Buthelezi when he says that:
“Never before have we seen such a deluge of racial slurs and divisive talk from leaders in our nation.” We share a responsibility to unite the country.
This year, we will commemorate the 200th anniversary of the Battle of Grahamstown, where Xhosa forces under the leadership of Makhanda took on the might of the British invasion force.
We also commemorate the Battle of Isandlwana, which took place 140 years ago, where the soldiers of King Cetshwayo inflicted a crushing defeat on the mighty British army.
These were acts of courage, acts of resistance, that will forever be remembered in the history of the struggle of our people.
These battles must serve as an inspiration as, once again, we must confront enormous challenges – this time as a united nation.
The challenges we face are many, are complex and are substantial, and we will require collective and concerted effort to overcome them.
If ever there was a time when South Africans need to work together, it is now.
There is a no single solution to the problems at Eskom – neither restructuring, nor refinancing, nor cost cutting, nor tariff increases, nor better plant maintenance on their own will have the necessary effect.
We need to pursue all of these measures and more, simultaneously, in a coordinated manner, and with purpose, to turn the utility around.
The decision we announced in SONA to establish three separate 100% state-owned entities – for generation, transmission and distribution respectively – has received the most attention, but it is by no means the only or most significant measure that must be undertaken.
In his budget speech next week, the Minister of Finance will detail the measures that government will undertake to assist Eskom to stabilise its finances.
It represents a significant commitment at a time when public finances are severely constrained.
It must therefore be accompanied by – and must be dependent on – a credible, far-reaching turnaround plan that has both an immediate and a lasting impact.
The leadership of the utility has already taken steps to cut costs and improve efficiency.
But much more needs to be done and it needs to be done more quickly.
One of the tasks that are essential to ensuring secure electricity supply is a dedicated and detailed focus on maintenance.
Maintenance doesn’t grab headlines, nor does it strike most people as even vaguely interesting, but an effective comprehensive maintenance programme, properly funded and led by skilled personnel, is the one thing that stands between reliable electricity supply and darkness.
We welcome the measures being undertaken to urgently strengthen this capability.
The fundamental principle that must underpin our response to the Eskom crisis is that it must be inclusive and consultative.
We accept, as government, that we have not done enough to bring some of the key stakeholders, such as labour, on board and are determined to correct this.
As social partners, as stakeholders, as a country, we have a common interest in finding sustainable solutions to the crisis at Eskom.
We therefore have a collective responsibility, which extends beyond our immediate interests, to work together to fix Eskom.
None of us can abdicate our responsibility, nor can anyone be left out of the process.
Where we disagree, let’s engage.
Let us put the facts on the table, let us examine the evidence and let us find workable solutions.
Let us not give up on finding a solution and let us not give up on each other.
Let us reject the false narrative that the only way out is through bitter confrontation and conflict.
Our challenges will be not be resolved in the streets, but we will gather around the table to find workable solutions.
As government, we understand the fears of workers about job losses at Eskom and in associated industries.
We understand the concerns of lenders, investors and business owners.
We will address them, directly and honestly.
The next weeks and months will be difficult as we effect the changes that need to be made.
It is our responsibility to ensure that throughout this process, we take the greatest care to minimise the negative impact on the most vulnerable in our society – the township and rural resident, the worker, the emerging farmer, the small business owner.
In tackling this urgent and serious matter, let us be cautious of reckless claims and political posturing.
There are sound, valid and compelling reasons to separate Eskom into different entities.
It is not a path to privatisation.
Restructuring will reduce the risk of a massive Eskom, that at times has in its current form, been termed too big to fail, placing Government in a position where all its eggs are in one basket.
It will align Eskom with international electricity trends, where the vertically integrated electricity utilities have been broken up to enable better regulatory oversight through a single buyer model, increase competition in the generation and distribution space driving down the cost of electricity for the economies.
A good example of this transformation is the People Republic of China.
A unitary Eskom has proven to be difficult to lead.
It has gone through a number of board and executive leadership iterations without trending towards a sustainable operational path.
Ultimately the restructuring of Eskom is intended to ensure security of electricity of supply for the country, which is critical to building up the positive investor sentiment and confidence essential for the investment required to the sorely needed jobs.
Eskom in its current form has a number of challenges that need to be addressed as part of the whole of Government effort: The unbundling of the business is starting to address the structural challenges.
Financially, the reference to cost cutting should be understood not to mean retrenchments.
Eskom’s cost structure has anomalies that require urgent attention if the business is to be put on a sustainable path.
The cost of procurement of different categories of commodities – the premiums commanded by suppliers – such as primary energy resources, replacement components for the generation units – has raised concerns with teams assembled to assist.
Operationally, Eskom’s plant age is on average above 37 years old and Eskom has seen some of the engineers that had been trained to maintain these legacy systems exit the business due to, in some instances underhanded leadership intervention to appoint pliable individuals.
Some of these experienced technical professionals have been traced to other parts of the world and responding to the Thuma Mina call have indicated their willingness to come back home.
In the immediate term, we need to intervene aggressively to put the load shedding behind us.
The teams assembled by the Presidency, Minister of Public Enterprises, and the Eskom Board need to prioritise the building up of adequate electricity generation safety margin to ensure the national grid is restored to state of robustness able of withstand the demands that will be placed on it by new industrial capacity enticed through the 2018 Investment Conference.
We all need to agree on the roadmap with concrete actions in the short, immediate and long term to achieve an end state of an electricity secure country.
While restructuring Eskom won’t solve the immediate electricity supply crisis, it will position the company to more effectively meet the country’s energy needs into the future.
It will improve the benchmarking of performance, increase transparency, decentralise management and allow better oversight of Eskom’s different functions.
It will simplify the management of what has become a complex and unwieldy organisation.
It will enable funders to better assess risk and opportunity, and open space for new investment in the generation capacity we urgently need.
Separating Eskom’s divisions into separate units will allow each entity to source funding on its own merits.
This is important because it allows the transmission and distribution operations to deal with their future roles in the power sector independently and, most importantly, identify and deal with their own urgent needs without.
Ultimately the restructuring of Eskom is intended to ensure security of electricity of supply for the country, which is critical for investment, growth and jobs.
I have constituted a Special Cabinet Committee on Eskom which will be led by the Deputy President consisting Minister of Public Enterprises, Energy, Finance, Transport, Intelligence and Police to be seized with the matter of Eskom on a daily basis and provide me with reports daily on what actions need to be taken to secure energy supply.