Speaking at the State of the Nation Address (SONA) in Cape Town last night, South Africa President, Cyril Ramaphosa announced that the state energy utility, Eskom, will be unbundled into generation, transmission and distribution.
The President stressed that the unbundling was needed because Eskom is currently in a dire financial position and the countries sovereign risk is at stake if the utility fails. “To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings. We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay,” said Ramaphosa.
A big backlash can be expected from labour union stakeholders NUM and Numsa whose main concern is job losses. Ramaphosa assured that “We will lead a process with labour, Eskom and other stakeholders to work out the details of a just transition, and proper, credible and sustainable plans that will address the needs of all those who may be affected”.
Ramaphosa also emphasized that the culture of non-payment of electricity services needs to be reversed. “We need to take steps to reduce municipal non-payment and confront the culture of non-payment that exists in some communities. It is imperative that all those who use electricity – over and above the free basic electricity provided – should pay for it,” said Ramaphosa.
Ramaphosa confirmed the government’s support for Eskom’s nine-point turnaround plan under the new Board. He also confirmed that an affordable tariff increase was needed to boost revenues. “In line with this plan, Eskom will need to take urgent steps to significantly reduce its costs. It will need more revenue through an affordable tariff increase,” said Ramaphosa.
Author: Bryan Groenendaal