Much has been spoken about the President’s “new economy” strategy, amidst efforts to clean up embedded rot and corruption in SA institutions over the past 15 years. What has become clear is the pole position Eskom needs to occupy in this revivalist strategy as the entity’s belligerent price gorging is the very reason SA’s economy has evaporated along with millions of jobs.
It is no longer a secret that deliberate tariff and asset inflation by a rogue Eskom syphoned over R1.4 trillion from the SA economy between 2006 and 2017 – a feat accomplished via excessive and criminal tariff increases disguised as “cost reflective tariffs”. What made matters worse is an almost R800bn in loans, all ostensibly justified by new builds which inflated from under R100bn to more than R600bn in total.
Thankfully, South Africans are not all ignorant, and clearly, realise most of the excess cash was illegally distributed by the ANC into jobs for cadres (over 34 000 of them at Eskom at 4 times the equivalent salary paid at other utilities in the world). Further losses are fruits of rampant corruption by increasing agreed tender pricing through delays and other self-inflicted stoppages.
A new angle to all this is, however, self-imposed tariff inflexibility as Eskom’s business customers get penalised monthly by the concept of Notified Maximum Demand (NMD). This is a tactic where Eskom demands customers notify in advance of maximum electricity to be used, and are held to that value. Any variance is heavily penalised. The NMD may not be changed in the initial 12 months, nor may more than one change be made in a period of 12 months.
This state of affairs is pure economic madness and clearly reveals that Eskom is still operating in the dinosaur age. Inflexibility in electricity does not inspire business to experiment, just as inflexibility in labour rules retard job growth. The 4th Industrial Revolution is about agility and meeting customer demands, and if this issue is not addressed by Eskom and Nersa, we might as well kiss SA’s participation in the next economic revolution goodbye.
By not relieving SA of Eskom’s draconian inflexible tariffs, we will soon be closing the last of our businesses and farming operations – who only reach peak demand once or twice per season, not every 30 minutes as Eskom’s contracts dictate.
Hopefully, Nersa will fulfil its duty in ensuring SA’s agility in the much needed new economy.
Ted Blom – Partner at Mining & Energy Advisors – 082 857 2534