The new version of Tito Mboweni’s strategic document on growth and reforms has dropped the possible sale of Eskom coal-fired stations. Labour was fiercely against this proposal. The sale of coal assets could – depending on tariff assumptions – raise around R450bn – enabling Eskom to possibly pay off its debt. The latest version is silent on Eskom’s debt problem.
Mboweni, in his mini-budget (MTBPS) this week talked tough on Eskom. However, by now South Africans are used to the political version of any issue and reality.
The amended version of Mboweni’s document as published by Daily Maverick
The kicking of Eskom big decisions down the road was not only apparent in Mboweni’s MTBPS, but a new version of Treasury’s strategic document had been released afterwards.
An earlier version of the document, which was released by Mboweni on 27 August. This had been done without consulting labour and some of his ANC comrades. It proposed the sale of coal-fired power stations, possibly by auction. It would have brought on board private sector participation. The sale of coal-fired power stations would include staff contracts, coal-supply contracts, supplier contracts, environmental obligations, as well as a power purchase agreement at a pre-determined tariff.
The new owners would supply a specific amount of electricity annually to Eskom over the remaining lifetime of the power stations, which would limit the fiscal and economic risk Eskom poses, the document said. Depending on tariff assumptions, the sale of Eskom’s coal fleet could raise around R450-billion, enabling the utility to possibly pay off its debt.
However, the new version of the strategic document had dropped the possible sale of Eskom coal-fired stations, which labour has fiercely objected to, saying it’s a ruse for privatising SA’s energy network by introducing independent power producers (IPPs). Labour believes IPP’s are mainly driven by profits.
Endorsing IPPs, split of Eskom
On Eskom, the new document, which was amended after Treasury received public comments, has endorsed key two energy policies recently revealed by Resources and Energy Minister Gwede Mantashe and Public Enterprises Minister Pravin Gordhan.
The strategy document, which is not a Cabinet document but a policy paper, said the IPP programme “should not be frustrated” as it would provide additional electricity to the grid through a diversified energy mix of renewables, coal, co-generation, and gas from the private sector. It would also provide electricity at a lower cost.
The Gordhan document detailed the unbundling of Eskom. It would start with establishment of a separate transmission company with its own board and CEO in March 2020. As Mboweni’s MTBPS and Gordhan’s document detailed the road map for Eskom’s future, the amended strategy document is silent on its debt problem.
Instead, the document is cited extensively by Treasury in the MTBPS as part of South Africa’s reforms to yank the economy out of a low growth trap (0.5% for 2019), boost investor confidence and make a dent in the near 30% jobless rate.
The five themes of the document were modernising network industries; lowering barriers to entry for new businesses and increasing competition to address distorted patterns in the ownership of the economy. It espoused prioritising labour-intensive growth in sectors such as agriculture; implementing flexible industrial and trade policies. It would promote export competitiveness and harness regional growth opportunities. If these interventions were to be implemented over time, it could raise potential growth by an additional 2,3 percentage points and create more than one million job opportunities.
Edited for length and style