Posted on October 2, 2010


The blundering mismanagement and incompetence of Eskom management and the government have together caused the current energy crisis which consumers are now expected to pay for via massive tariff increases. Yet, at the same time, this situation has ironically highlighted another factor: that a state-owned utility can efficiently produce the cheapest possible electricity.

For, as the labour movement has already pointed out, Eskom’s problems stem not from its original ownership structure, but from the fact that this was changed. What was a public service utility is now a profit-driven, dividend paying entity.

Along with this transformation came hefty salaries and bonus payments to a new breed of fat cat bosses. But, at the same time, in order to make Eskom more attractive to the private sector, the debt necessary for the building of needed new power stations was not entered into.

Eskom was “corporatised” on the road to once hoped-for privatisation. Then, as it sallied forth into the anarchy of the marketplace, it also gave up its tied coal supply deals which had guaranteed a steady flow of low priced fuel.

Instead, a “liberalised” Eskom started buying coal on the spot market. Now the coal price has soared and, with it, Eskom’s costs.

As many in the labour movement see it, this is not so much a case of bad planning, but of a move away from planning for people into the casino of private profit.

These are among the factors that the unions intend to bring out if an when an energy summit is held. Cosatu has has launched an urgent call for such a summit, along with a demand for a moratorium on tariff increases until there is greater clarity about the energy situation.

Says Cosatu spokesperson Patrick Craven: “First we are told Eskom needs an 18 per cent price increase. Now it’s 60 per cent. We need to know what the situation is and why.” The unions also want clarity on the various excuses advanced for power outages, from wet coal to generator maintenance.

To get the debate underway, the Federation of Unions (Fedusa) has arranged a high-powered panel discussion on this issue and the wider economy to coincide with the Reserve Bank’s monetary policy committee meeting next Thursday.

Says Fedusa general secretary Dennis George: “The questions of price increases, economic growth, price stability and the prospect of further interest rate rises have got to be dealt with.”

Among the issues the unions will canvass is the possibility that minerals exporting companies that have been making huge profits out of the current commodities boom should face an “energy levy” of 5 per cent (or more) of their profits to pay for Eskom’s recapitalisation.

Says Craven: “We agree with the principle that the rich should pay and this is something we will be looking into.”

The unions are acutely aware that this week’s biggest-ever petrol price increase will also have a dramatic impact on consumer prices across the board. Coupled with any large rise in electricity charges and a possible interest rate hike, large-scale job losses are in prospect.

Transport and food should also remain the main drivers of inflation which now stands, officially, at 9.4 per cent. What this means is that, once again, it is the poorest who will be hardest hit.

According to the tally of food prices monitored by this column, the overall increase of the price of a basket of basic food bought at an urban supermarket has risen by 24.5 per cent since June last year. This is less than half the level of operating profit recorded by Anglo Platinum last year when this leading platinum producer posted a $1.299 billion profit.

Posted in: Archive - 2008