Over the last week, I have noticed that Eskom is now using the rising cost of raw materials procured for electricity generation as yet another means to justify their ends: a massive price hike.
However, what many don't know is that Eskom has a restrictive procurement policy in place, which means that instead of putting a large amount of their procurement requirements out on tender, they draw from a very limited pool of approved vendors.
Getting on the vendor list is notoriously difficult, and many smaller contractors and suppliers simply don't meet their excessively strict criteria.
Many of the criteria involved relate to BEE and preferential procurement, however, while we all realise that BEE is a fact of life, and here to stay, does that justify paying up to 20% or 30% more for goods and services?
Is this simply a means to ensure that Eskom's preferential procurement figures look good on paper? But to whose detriment?
Lack of competition
Having been involved in the contracting industry for many years, with a company that was on this elite list, I know that these companies use the lack of competition to their advantage.
Having a limited pool of suppliers also means that price fixing amongst these suppliers is rife.
In the industry I was involved in, there were only three contractors that I know of at the time, and in our area, who were allowed to, or indeed invited to, quote or tender on Eskom's projects.
Since the opportunity was so clear, it was often decided well beforehand who would take which contract, at what price, and what the others would get out of the deal.
Obviously, if Eskom wants to pass on their costs to the consumer, they would need to first examine their procurement policies, initiate fair and open tenders on all work, and ensure that they are getting the best possible price!
Ask yourself, would you purchase anything, particularly a major cost item, without first shopping around? No? Then why is it acceptable for one of the largest parastatals in the country to do so, and then complain that they are paying too much?