South Africa’s State Electricity Supplier “On Verge of Collapse”

South Africa’s Finance Minister Malusi Gigaba warned this week that if the crisis facing state-owned electricity supplier, the Electricity Supply Commission (Eskom) is “not dealt with urgently, South Africa’s whole economy could collapse” before the end of January.

According to reports in the South African media, Gigaba said at a pre-World Economic Forum (WEF) breakfast meeting in Johannesburg that the state “simply does not have the funds to bail out Eskom” and that the utility could collapse before the South African team at the WEF in Davos return once that conference ends on January 26.

“There would be no currency, and no economy for the country if Eskom went belly-up,” Gigaba warned, adding that the “crisis is extremely serious. “

The finance minister said there are “problems at Eskom’s board and senior management, who simply don’t seem to grasp the seriousness of the situation.”

Deputy President Cyril Ramaphosa—recently elected president of the ANC and therefore the country’s next president—said at the same meeting that “the challenges around Eskom are huge, and said the state-owned enterprise is top of mind.

“The minister of finance is seized with this on an hourly basis,” he said in answer to a question on the seriousness of Eskom’s financial woes.

Earlier, Gigaba told reporters that “Eskom is the biggest issue keeping him awake at night.”

The board—all “affirmative action” appointees who were pushed into their positions—displacing the white governors who had successfully run the corporation since its founding in 1923—have steadily run down the corporation due to a series of basic and compounding errors.

These errors have primarily included letting untold millions of blacks have “free” power (all actually paid for by hikes to the tariff-paying sector of the population, i.e. the whites) by letting them run up billions in unpaid bills, gross day-to-day mismanagement and lack of structure maintenance which has caused the “rolling blackouts” for which the country has become infamous, and then finally a reckless and ill-planned rush building program to make up the supply shortfall.

The latter building program seems to have pushed Eskom to the brink, as its debt due to the commissioning of two new facilities—at Medupi and Kusile—has seen the corporation use R275 billion of the state Treasury’s R350 billion’s worth of government guarantees.

The guarantees were made to a set of international and local lenders who put up the cash—and who now have expressed concern that Eskom has botched the process. They have threatened to call up the debt with the government—something which, if it happens, will bring about the collapse which is keeping Finance Minister Gigaba awake at night.

In November 2016, the Fin24 news service reported that the that the power utility’s “poor governance had left it teetering on the edge of insolvency, with only R1.2bn of liquidity reserves expected to be in hand at the end of the November.”

Furthermore, Fin24 added, in its latest report to its shareholder representative, the utility said it would have a R5bn negative liquidity position by the end of January—one of the factors which sparked the lender’s unease.

* It was announced today that all Eskom executives who are facing “allegations of corruption,” including former acting chief executive Officer (CEO) Matshela Koko and suspended chief financial officer (CFO) Anoj Singh, are to be removed immediately from their positions as part of the government’s efforts to ward off a collapse by boosting investor confidence that they are doing something about the situation.

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1 Comment

  1. This problem has been going on ever since the ANC took power, I saw a report of all the power stations built during SA’s future & only a couple of them have been built since 1994 & the ones running on air, with “workers” able to take hours long breaks.

    Africanomics at it’s best.

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