Note to editors: Please find attached soundbite by Dr. Dion George, MP.
The announcement that Eskom oversight will be transferred to the Department of Energy sets off financial alarm bells and falls far short of the real reform of the energy sector that South Africa desperately needs. It is inadequate, short-sighted and a step in the wrong direction.
It is well established that the root cause of Eskom’s problems stem from a lack of structural reform, mismanagement, corruption on an industrial scale, inadequate competition in the electricity market, and weak governance and regulation. Simply shifting the oversight of the company to another government department does nothing to address these underlying issues, and Eskom will continue its current trajectory of financial and operational decline.
The change in oversight has caused significant financial concern among investors and has led to a number of questions being raised about the future governance structure of Eskom and the status of Eskom’s massive debt. The fact that the Energy Ministry is both a shareholder of Eskom and responsible for regulation and competition in the sector will present a clear conflict of interest.
Eskom was “corporatised” at a massive expense and that structure has failed dismally. Investors want to know if that structure will be collapsed into the department and, if so, what form the governance structure will take. Most importantly, what happens with Eskom’s debt? By transferring the entity, does the Department, and hence National Treasury and taxpayers, guarantee the approximately R200 billion debt that is not already earmarked for the “swap” from Eskom to the National Balance Sheet?
Bond investors are already extremely nervous that Eskom can’t repay their interest and capital. If Eskom is to be collapsed into the Department of Energy, could this mean that the debt won’t be paid and investors required to take a haircut? National Treasury cannot afford the proposed “swap” in any event and increasing the national debt burden at a time when our economic growth will slow down as a result of the rolling blackouts, is gross negligence of fiscal responsibility.
The lack of transparency and clear answers to these critical questions from the Government highlights the need for true and comprehensive reform of Eskom. The DA has consistently called for real and structural reform of Eskom, including unbundling the utility into separate generation, transmission, and distribution entities, and encouraging independent power producers to enter the market to increase competition.
The DA calls on the Government to provide clear and transparent answers to the financial concerns raised, and to take decisive action to address the root causes of Eskom’s problems by implementing the real structural reforms as presented by the DA rather than engaging in superficial measures that are as effective as re-arranging deck chairs on the Titanic.