Eskom 'needs urgent surgery'

Nelspruit - Eskom is the heart of the economy and South Africa needs to realise that an urgent coronary bypass is needed to ensure the future of the economy.

These were the words of Mpho Makwana, Eskom's acting chief executive as well as its acting chairperson.

The utility is aware that electricity tariff increases are a bitter pill to swallow, but the increases are the best option for South Africa's future, he insists.

On Monday Eskom was one of the players to submit proposals to the National Energy Regulator (Nersa) in Nelspruit during the regulator's first public hearing on Eskom's application to hike electricity prices by 35% a year over the next three years.

Makwana says that over the next three years Eskom expects to spend an average of R103bn/year on capital projects. The total capital expenditure required by 2028 to ensure South Africa's electricity future is currently close to R1 000bn. Current electricity tariffs are however too low to allow Eskom to absorb this funding.

Makwana says parties that are opposed to increases must realise that without electricity there will be no economy.

But Eskom's application has been sharply rejected by trade union Cosatu.

Cosatu says Eskom cannot hold the country to ransom. It cannot be blackmailed by Eskom. The utility can't simply declare that "tariffs must be increased or there will be no electricity".

Fidel Mlombo, Cosatu's provincial secretary in Mpumalanga said that more than 40% of South Africans were currently unemployed. How could these people suddenly manage to pay 35% more for electricity?

Cosatu would not accept hikes of 30% or 20% or even 15%, and would negotiate with Eskom about increases of possibly less than 15%.

According to the trade union, government can make more money available for Eskom's power stations from the R787bn already approved by the state for capital projects.

Martin Slabbert, a manager at the TSB Sugar sugar mill, says the agricultural industry, which is dependent on irrigation, will not survive the shock of a 35% hike.

The anticipated increases would certainly destroy the sugar-cane industry in Mpumalanga. The cost of irrigating sugar cane in that province currently amounts to about R2 000/hectare. If one adds Eskom's planned increase, the figure will skyrocket to R4 950/hectare.

This means that the break-even point for farmers will rise from the current 74 tons of sugarcane per hectare to 87 tons.

The problem, says Slabbert, is that 74% of the farmers in the area are unable to produce 87 tons per hectare. The tariff increases will destroy the industry and plunge 400 000 dependants in the area into poverty.

The next hearing will be in Polokwane on Tuesday.

- Sake24.com

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