Energy news – budget vote season at Parliament

10 June 2008

The past four weeks have seen Parliament debating the budget votes of the national departments – an annual ritual and a busy time of year for the National Assembly – and Friday was the turn of Minerals and Energy .

Unsurprisingly, DA minerals and energy spokesperson Hendrik Schmidt put the energy crisis front-and-centre in his speech in the debate, saying that the department had been affected by some of the worst crises since 1994.

“It was Cabinet who took the decision not to allow Eskom to expand its generation capacity in order to lure private investment,” said Schmidt. “It was Eskom who warned government that South Africa would run out of power in 2007/8 followed by a failure by Cabinet to heed this advice. It was government who failed to restructure the electricity regulatory environment to attract private business – which was expected to invest billions of rand over a return of a period of 30-40 years. It is shortsightedness, lack of political leadership and vision as well as a failure by this government to give practical effect to the reality of the decision to attract private investment that has lead to the current crisis.”

He reiterated the DA’s call for an independent inquiry into Eskom’s management, and for the restructuring of the electricity sector to encourage private sector investment – a view echoed by a top business group this week.

Eskom was also a key focus of DA spokesperson on public enterprises Manie van Dyk’s speech in that department’s budget vote debate in May.

Besides suggesting that both the minister and the Eskom board should have resigned “as a matter of honour or rather as a matter of urgency”, he spelt out a number of recommendations to improve the situation and concluded with a list of questions for the minister:

1. Whether exports of electricity to foreign countries have increased since January while electricity distribution to the nine provinces by Eskom has declined.

2. Whether foreign countries pay the same electricity tariffs as South Africans.

3. Whether foreign countries’ bills are paid up to date.

4. Whether government will reconsider the economic necessity and existence of aluminium smelters – which consume 3 000 MW, equal the current shortage of power, so as to bring load-shedding to a halt?

5. Will his Department and Government reconsider Eskom to be a monopoly with Government as sole shareholder where Eskom is the only buyer and distributor of electricity? What measures are in place to attract private electricity producers to South Africa?

6. Whether Eskom will amend its policy to employ skilled people of all races on a merit basis where productivity will be the criteria for employment?

7. Whether your Department will propose to Cabinet that tariffs on alternative energy equipment imports be scratched?

8. Further to this, whether expenses incurred by consumers when purchasing alternative energy equipment will be rendered tax deductible?

9. Whether a lower tariff for households who save 10% will be mplemented.

10. Whether the daily service levy and network levy imposed on farmers will fall away because of load-shedding.

11. Will you, as Mr. Manuel already did, agree to an independent commission of enquiry into the Eskom crisis?

12. Whether it is true that Eskom invested its savings on maintenance in the private sector to realise greater profits -which led to higher bonuses for senior management?

13. Whether a 60% tariff increase will result in a R12bn profit and if so, can Eskom’s senior management be expecting further bonus payouts?

14. Whether you and Eskom management will be prepared to resign.



  1. It was not Eskom that warned Government that we would run out of power – it was Government itself. The DME’s White Paper on Energy Policy in 1998 said “Eskom’s present generation capacity surplus will be fully utilised by about 2007. Timely steps will have to be taken to ensure that demand does not exceed available supply capacity – -. The next decision on supply-side investments will probably have to be taken by the end of 1999 to ensure that the electricity needs of the next decade are met.” The DME’s Integrated Energy Plan of March 2003 said “According to the baseline simulated scenario, which assumes a 10% reserve margin, South Africa will be short on capacity by 2005-2007, unless demand side management or new plant is built. Assuming the 10% reserve margin on a gross capacity of 37 000MWe, the current net capacity is 33 300MWe, which is only 1 800MWe (that is the size of Koeberg) above the peak demand. Given the time to commission new plant, the current electricity generation system could soon be viewed as vulnerable.” Please stop blaming Eskom – the fault lies elsewhere. Eskom is the easy target – the DA needs to focus on Government’s faults.

  2. Indeed, Government is the one to take the blame. It stated what was to be done by what date, and then did not do it.
    But don’t stop blaming Eskom. Eskom’s then management should have squealed like a pig in distress from 1998-99 onwards when nothing was forthcoming of all those noble words in the White Paper. But it did not. It forgot its mission, it paid bonusses, and in the interest of BEE it let its expertise base dwindle to below sustainable levels so that there was hardly anybody left to notice the slide towards the abyss. Its library no longer subscribed to advanced technical journals but to literacy courses instead. Even if given the funds and the approval to start building capacity, it can no longer do so itself. It became a hollowed-out organisation that has to rely on contractors to do its work.
    And as for pricing its product, years of charging the ‘cheapest rate in the world’ in order to placate government and users resulted in a capital shortage that even the present price increases cannot fill. In stead of recovering the cost of new plants from electricity users, it now has to be funded by the taxpayers, a much smaller fraction of our population.
    In the incompetency stakes, Eskom is but a short head behind the government.
    Whether bonusses for the present incumbents are in order for manoevering this stumbling giant through the recent panic situation is a moot point.

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