IN THE coming months South Africa will be chatting about electricity more than ever before. Electricity prices, as we now know, will probably rise 45% a year for three successive years.
Trade federation Cosatu is likely to launch mass action - perhaps even call out a countrywide strike. Many interest groups will make submissions to Nersa about the proposed increases.
In February or March 2010 the National Energy Regulator of South Africa (Nersa) will be holding a public hearing on the matter. Many civil groups and organisations will object and testify as to how the proposed increases will impoverish their members.
"I am deeply convinced that we have to choose between much more expensive electricity or no longer having a reliable electricity supply," said Eskom chairperson Bobby Godsell in an interview with Sake24 last week.
These are weighty words with enormous implications for everyone, but they come from one of the country's most respected public figures. Just take a look at Eskom's 92-page tariff application published on the electricity giant's website last week - the facts underlying Godsell's statement are well founded.
The National Economic Development and Labour Council (Nedlac) is unlikely to hold another summit as it did on last year's increases, hoping to force a more lenient tariff settlement from Eskom. There is no space or time for that. Eskom already has government support for the proposed hikes.
The reasons for Eskom's application to raise electricity tariffs are beyond question. Even before the electricity crisis in January 2008 several power industry analysts reckoned drastic increases of up to 200% were already unavoidable.
Dire engineering shortage
Eskom's numbers and funding requirements to complete its construction programme should not be the main consideration when Nersa decides whether it will permit the electricity giant to inflict such hardship on the country. There are other issues that should burden Nersa more.
These relate to statements made by Solidarity deputy general secretary Dirk Hermann last week to the congress of the South African Chamber of Commerce and Industry. Hermann said government can forget about any policy options until it raises public sector capacity to a point where policy can be applied effectively.
Reshuffling policy stances like affirmative action, land reform and black economic empowerment is actually a fruitless waste of time. An average 23% of public service positions are vacant - and in categories demanding high levels of skill the figure is considerably higher.
There are about 1 350 civil engineers in local authorities, equating to three per 100 000 of the population. A decade or so ago the number was 21 per 100 000.
At the same time, infrastructure and public services have been expanded to serve a section of the population many times larger than before.
"The situation is, quite simply, that perfectly formulated policy will fail at the application stage because of the large number of vacant posts and lack of skills," Hermann said.
Does this apply to Eskom? If so, Nersa cannot approve Eskom's application.
The electricity crisis which resulted in the suspension of electricity to the mining industry on January 24 2008 is an indication that something is seriously amiss at Eskom.
To date, Eskom CEO Jacob Maroga has declared on various platforms, as well as in Eskom's previous Nersa application, that the reason for the crisis was Eskom's low reserve margin (the difference between its peak generating capacity and its peak demand for electricity), which is currently between 8% and 9%. It needs to be more than 15% to guarantee a reliable electricity supply.
More recently, Godsell publicly admitted what everyone knew: that Eskom had made a hash of supplying coal to power stations. "If coal-fired power stations have no coal, you have a problem," he quipped. Then, on a serious note: "We have messed up. We apologise."
It was a R50bn bungle, Godsell. But that's in the past, it's water under the bridge.
Maroga's mysterious inertia
What is troubling is that six months earlier Maroga received a report from American consultant Susan Olsen, which bluntly warned that Eskom's coal operations were heading for collapse. He did nothing in those six months to avert the crisis.
"The Eskom board is currently examining the report. It is analysing the validity of her criticism when it was delivered, as well as whether there was any part of her criticism that was not fully addressed. The board has a list of her points of criticism and a list of management's responses," Godsell said.
He believes the report raises extremely important issues.
A private sector CEO making an error of such magniture would quickly be ousted. Think how abruptly Bernard Swanepoel departed a little over two years ago when there was a mistake in Harmony's financial results - for which he himself had not even been responsible.
This appears not be Maroga's fate, despite the board's scrutiny. Why not?
Could it be that he knew Eskom's coal division did not have the capacity to act? If so, has the capacity in terms of skills since been taken on board? If Eskom still lacks those skills, the tariff hike should certainly not be approved.
Or did Maroga perhaps lack the managerial ability to act? Eskom's coal procurement is an enormous business with many vested interests. Might there have been political influence preventing him from taking action?
Eskom's R385bn construction programme is even bigger than the arms procurement programme of the 1990s, which is today better known as the arms deal scandal.
Godsell retired from AngloGold Ashanti after a glittering career. It's difficult to imagine he would permit his life's work to be sullied by a similar scandal.
But even with his credibility underpinning the Eskom application, Nersa should insist that the utility prove its competence in terms of expenditure before the tariff hike is approved.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.