Corruption
In 2005, the ANC’s investment arm, Chancellor House, bought a 25% stake in Hitachi Africa. Eskom then awarded Hitachi a contract to build boilers at Medupi: the ANC made a financial investment in a company that a state-owned company (Eskom) subsequently did about R105-billion worth of business with. From 2008 to 2012, Hitachi Africa paid Chancellor House $10.5-million: a 5 000% return on its initial investment of just under $200 000.
A subcontractor to Hitachi Africa supplied and installed an ash handling plant that subsequently failed, causing machine grinding fly ash to spread across the plant. About nine thousand of Hitachi’s welds on the boilers were faulty. According to Eskom, the cost of Hitachi’s design flaws is about $4.9-billion.
Widespread looting of the state defined the administration of then-president Jacob Zuma and Eskom was right in the middle of it. Media reports in April 2019 indicate that South Africa’s Special Investigating Unit is examining cases of theft, totalling $9.7-billion, with regard to the construction of the Medupi and Kusile power stations.
Because of design flaws and construction delays, Medupi is performing nowhere near its theoretical capacity and load-shedding has become all too common. Each day of load-shedding costs the economy an estimated $140-million.
Medupi bleeds money. So much so that Eskom’s debt is now so large that no one has a real idea of how it will ever be paid back: its debt has increased by about $2.8-billion over the past decade while electricity tariffs increased 488% from 2006 to 2017. And, as Eskom is owned by the state, that debt is ultimately the state’s debt.
Eskom’s credit rating went to junk in 2016.
In 2017, Fitch and Standard & Poor’s rated South Africa’s credit as junk. Moody’s followed earlier this year. Taxes have increased in South Africa yet tax revenue is down. The economy is now in a technical recession. Debt rolls over. Austerity beckons.
In his state of the nation address in June last year, President Cyril Ramaphosa announced a $16-billion bailout for Eskom. The last rating agency to keep the country at an investment grading, Moody’s, junked South Africa on March 27 this year.
One of the immediate casualties of Eskom and the state’s deepening debt trap is the planned, desired, wished for expansion of coal mining and use in and around Lephalale. Despite its name, the Waterberg simply does not have the water for all the planned mines and power stations. The only way to provide the water is to build a $970-million water transfer scheme that includes a 100km pipeline. The project most likely to happen at this stage is Exxaro’s Thabametsi mine and the attached 600MW coal-fired power station: civil society activists are challenging the environmental authorisation for the power station in court.
So the town patiently waits. A few in terror of what could come, of ash dumps covering fields and sulphur flavouring the wind, but most in hope, albeit fading hope. Hope that another big power station will be built, and more mines dug. If the water comes, then so will the machines, union jobs, migrants, and contractors to fleece through overpriced rentals. The two shopping districts will reverse their entropic decline. Money will be made. The view that coal is development is, perhaps, the only common thread in this divided town.