Experts: Eskom will drag us all down with it

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Experts: Eskom will drag us all down with it

Following Monday's announcement of losses by Eskom, we've been advised to prepare for the worst

Journalist

Eskom’s financial problems will hit already- under-strain  South African consumers hard – even more so as those consumers are currently faced with escalating fuel hikes.
So said analysts after the power utility announced its losses on Monday. In the next three financial years, they speculated, electricity hikes could go up by 110%.
Energy analyst Ted Blom said electricity consumers should prepare for the worst.“By 2019/20 financial year expect a 30% electricity hike, followed by 50% the following year and 30% the other year. This is a reality. Eskom over the past 10 years has come out with a high tariff raising strategy which has enabled them to fleece the country’s economy of some R1.3-trillion,” said Blom.
Another analyst, Somadoda Fikene, said the poor will suffer the most.
“The poor are the most to be affected by this as Eskom will try to recoup their losses. We will see price hikes while at the same time they are failing to diagnose what their problem is,” said Fikeni.
Bantu Holomisa, leader of the United Democratic Movement, said Eskom continues to milk the poor.“Eskom is getting away with murder. They are milking the poor with high tariffs and they are constantly losing money. Where is this money going to?” asked Holomisa.
On Monday, Eskom announced that earnings before interest‚ tax‚ depreciation and amortisation (ebitda) increased from R38-billion to R45-billion while revenue was flat at R177-billion‚ with electricity sales up 0.9%.A net loss of R2.3-billion compared poorly with last year’s profit of R900-million. The net finance cost grew by 61% to R23-billion.
This was linked to fewer costs being capitalised and a growth in borrowings. On the R19.6-billion irregular expenditure — increased from R3-billion in the previous financial year — Eskom said 60% of incidents related to administrative noncompliance‚ and noted that irregular spending was not necessarily fruitless and wasteful expenditure.
Fikeni said despite Eskom’s explanations, it first needs to solve its internal problems. He said people are suffering from ruthless Eskom decisions.
“People continue to suffer as this rot and ruthless approach by Eskom will take time to be resolved. This is hitting hard on poor South Africans who depend on this utility for energy,” said Fikeni.He said Eskom “has the monopoly” as it knows that people depend on it for electricity.
“No one is providing electricity in the country and electricity is a basic right, but what is happening there is wrong. Solutions are needed.”
He added the fact that Eskom management keeps on changing is not assisting the situation.
“We can’t keep on changing the management and move them around while they are implicated in allegations of fraud. Eskom’s problems are affecting the country, not them,” said Fikeni.
He said we will see the same managers “re-appearing” in other state entities.
“These entities have become sanctuaries for crooks. Executives are being recycled around. This country is like a movie,” he said.Democratic Alliance shadow minister of public enterprises Natasha Mazzone said the reality is that Eskom is facing collapse and it will continue to stumble from one crisis to the next until such reforms are implemented.
“The DA will continue to fight for an efficient and transparent Eskom. South Africans deserve a power utility that delivers reliable energy to the economy to empower it to grow and create jobs for the 9.5 million unemployed South Africans,” said Mazzone.
This comes as the utility is struggling to pay staff increases. Initially Eskom said it wouldn’t pay staff any increases but, because of pressure from the unions, it has since promised an increase of 7.5% for this year, and further increases for the next three financial years.
In its defence on Monday, the power utility put blame on corrupt individuals who have since left the company. Eskom said it has seen 10 CEOs in 10 years and six boards in the same period. In its statement, Eskom said 10 implicated senior executives exited and finalisation of “outstanding disciplinary hearings relating to senior executives are being accelerated”.
In the period some of Eskom senior executives were involved in questionable activities that involved the Gupta family.Former group executive officer Brian Molefe got the Eskom job at a time when then country was facing load shedding. The Gupta Leaks reveal that he had constant contact with the Gupta family and visited their Saxonwold home a number of times. The Guptas, at the time, had multi-billion-rand tenders to supply coal to Eskom power stations.
Then there was Matshela Koko, who was acting group chief executive of Eskom. Koko’s stepdaughter was reported to have won tenders with Eskom and Koko was also implicated in the R600-million payment to Gupta-linked Company Trillian Capital Partners.
It was also revealed that the Gupta mines supplied Eskom with substandard coal. The mines, Optimum and Koornfontein, were later placed under administration.
In June, Nersa received a notice of motion regarding Eskom’s intention to take Nersa’s decision on Eskom’s revenue requirement for the 2018/19 financial year for judicial review.
On December 15 2017, the Energy Regulator approved allowable revenue of R190.348-billion for Eskom for the 2018/19 financial year. The approved allowable revenue resulted in an average percentage price increase of 5.23%, effective from April 1 2018.
Eskom had applied for total allowable revenue of R219.514-billion, which would translate to a 19.9% average percentage price increase. 
On Monday Nersa spokesperson Charles Hlebela said it noted Eskom’s results, but would not comment further.
Eskom is owed billions of rands by municipalities. In May parliament vowed to deal with staggering debt municipalities owe to Eskom‚ with just 10 defaulting councils owing the power utility close to R10-billion. In its report, Eskom said the amount owed by municipalities is currently sitting at over R13-billion. Also, Eskom is struggling to service its debts, which are sitting at R23-billion. This is linked to growth in borrowings.

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