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By unknown | May 22, 2008 | COMMENTS [ 0 ]

Eskom almost pulled off one of the finest financial finessing moves of the decade - but the parastatal's plans now appear to have been spiked.

Eskom almost pulled off one of the finest financial finessing moves of the decade - but the parastatal's plans now appear to have been spiked.

The national electricity supplier seemed to have everything going its way when it approached the National Energy Regulator of South Africa (Nersa) recently with an emergency appeal for a 53percent hike in tariffs.

Cynics, particularly from the unions, claimed that the power outages had been contrived for political purposes.

Eskom protested that it was running its plants all out to keep up with demand after the government had turned down plans to invest in new generating stations 10 years ago.

All true, but the devil is in the detail, and these have been dribbling out slowly.

First off, Nersa released a report this week claiming that Eskom had neglected maintenance at its aging plant. That helped the company save money, reflected well on the bottom line and justified big bonuses for managers.

The regulator also blamed the company for allowing its coal stockpile to run down to unacceptable levels.

Time was when Eskom signed long-term contracts with its coal suppliers. For many reasons, including meeting BEE objectives, the company switched its focus to short-term contracts in recent years.

And as the price for export coal rocketed with demand for even the lowest quality, so short-term prices have gone through the roof.

Now 25percent of its coal comes from short-term contracts, often at way more than double the price of the long-term deals.

Eskom chief executive Jacob Maroga said yesterday that the main reason for asking for the 53percent tariff hike was to cover the cost of this expensive fuel.

Now we have to work out a plan to pay for this fuel and for building new power stations unless we are prepared to give up on an economy that is already creaking under Eskom's blackouts.

Cosatu and other civic groups, mindful of the welfare of the poor, are screaming about the tariff hikes due to be decided on June 6.

International rating agency Moody has put Eskom on a special watch. That likely means its credit rating will go down, meaning commercial loans will cost more.

Others say the government, which dropped the ball a decade ago, should pick up more of the cost of Eskom's trillion-rand construction programme. But where does the government get its money?

Any which way you look at this, directly or indirectly, Joe Citizen will be paying the bill for state and Eskom mismanagement.


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