Eskom is getting killed – expert

High electricity prices are dampening economic growth and reward incompetence and irrationality at Eskom, energy adviser Mike Rossouw warned.

In an article in Rapport, Rossouw wrote that the government continue to allow Eskom to increase prices despite the negative impact it has on all parties.

He warned that the policy of continued price increases will have very negative consequences, especially with electricity prices now being “completely out of control”.

Rossouw added that the current policy allows Eskom to increase prices to compensate for loss-making projects, poor procurement decisions, and even load-shedding.

This view is echoed by RW Johnson, who said money handed over to Eskom is wasted as it will simply be used to pay inflated salaries to many unnecessary workers and finance corrupt deals.

Eskom CEO confirms problems

Eskom’s R20.7-billion loss over the last financial year is the largest ever by a state-owned company in South Africa.

Eskom’s acting CEO Jabu Mabuza told Radio 702 that Eskom has overborrowed to the tune of R440 billion and that its revenue is not enough to service its current debt.

He added that Eskom is selling electricity at 90 cents which costs the company 112 cents to produce.

An additional problem is that many of the municipalities which it sells electricity to do not pay their bills. This, Mabuza said, amounts to around R40 billion.

While Eskom is heavily overstaffed, the company is prohibited from cutting jobs which makes it nearly impossible to become more efficient.

“The president said we can’t retrench, which means we are looking at other ways. The pain has to be taken by suppliers, customers, shareholders, employees, and management,” he said.

Eskom’s downward spiral

Over the past decade, Eskom rapidly grew its workforce and expenses, but did not significantly increase its electricity output. In fact, it decreased in some years.

The graphs below show how Eskom landed in such a desperate financial situation.

Average revenue per kWh (linked to electricity price)

Eskom Expenditure (lower is better)

Money owed to Eskom by municipalities (lower is better)

Eskom debt (lower is better)

Eskom profit (higher is better)

Now read: Eskom posts R20.7-billion loss

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Eskom is getting killed – expert