Minister of Public Enterprise Pravin Gordhan has presented a Special Paper on Eskom which details how the utility will turn itself around.
The future of Eskom will be based on the Integrated Resource Plan which aims to reduce South Africa’s reliance on fossil fuels for energy generation.
The big announcement that came as part of the presentation of the paper was the separation of Eskom. This split is not to be confused with privatisation – something Pravin called “part of the fake news industry”.
Eskom will become a holding company which owns two subsidiaries – transmission and generation.
Transmission becomes one such subsidiary of Eskom. This section of the business will be responsible for the transmission of electricity, maintaining infrastructure and determining how much energy is needed at any given time.
The transmission business will source power from Eskom’s energy generation business as well as from the private sector when needed.
This transmission subsidiary will launch in an official capacity by 31st March 2020 according to Gordhan.
As for generation, while Eskom will still maintain control of this portion of the business, it’s being shaken up.
Gordhan has proposed that power plants be separated into clusters with each cluster operating as its own business. Each business will need to be as efficient as possible in order to sell power to the transmission business.
The minister believes that this will create internal competition and stoke greater efficiencies throughout the supply chain. This has been done before with Gordhan using Vietnam as an example of using internal competition to inspire healthy competition in an energy sector.
While this did increase power generation in Vietnam, internal competition alone did not fix the sector as it was rife with corruption and malfeasance.
Which brings us nicely to State Capture.
The damage done by the Gupta family and the officials they corrupted is far reaching and as Gordhan put it “systemic”. The rot within certain entities is far reaching and Eskom was not immune to the lure of money. More must be done to rid the entity of this rot if there is any hope of turning the ship upright.
With that having been said, Eskom is not blameless in the crisis it now faces. A lack of maintenance leading to a lack of generating capacity has led to loadshedding returning and the fear of it constantly over our heads. Financial issues mean Eskom requires more funding than it makes and coal prices are crippling the utility.
The minister along with government are currently investigating firms which make 100 profit on sales of coal to Eskom as well as original equipment manufacturers which are allegedly overpricing parts and services for Eskom.
Making Eskom more efficient in not only how it generates electricity but with how it manages its funds would go a long way to helping fix the problems but how Eskom implements this and how effective separating the business will be, remains to be seen.
It should also be noted that the plan to turn Eskom around is not one that will take effect overnight and it may be months before we see positive news from Eskom.