Publications
Partners
THE court application by Sake24 to obtain information from Eskom and BHP Billiton [JSE:BIL] was heard in the South Gauteng high court last week, almost two years since Jan de Lange first submitted the request to Eskom in terms of the Promotion of Access to Information Act (Paia).
This relatively simple Paia application drew a large number of lawyers and advocates to the courtroom, and also some journalists from other publications who opted to attend this hearing rather than the hate speech hearing of Julius Malema, ANC Youth Leader leader, in another court.
Although the application was fairly simple and the proceedings lasted only a day and a half, it once again highlighted the complex scenario of Eskom's (in)ability to provide electricity to the economy and the message this sends to foreign investors – investors that the government is trying to persuade to build factories and mines - to create employment.
South Africa is currently facing a situation where two smelting plants consume about 5.68% of the power that Eskom generates.
Sake24 surmises that BHP Billiton pays considerably less for this electricity than it costs Eskom to generate it, whereas ordinary citizens will be burdened with annual increases of 25% for the next three years.
South Africans are straining to subsidise the profits of one of the largest companies in the world, while there is a shortage of electricity in the country.
It is also interesting that Eskom did not oppose the application by Sake24.
The group says it submitted a significant amount of information to the court and it will abide by the ruling.
Even more interesting was the comment on Twitter by a senior journalist who attended the court proceedings that a senior Eskom employee had whispered to him that he hoped Sake24 would win the case.
One can only imagine how upset BHP Billiton must be about this. Eskom had been eager to clinch the contracts between them in 1995 and 2001 (for periods of up to 30 years) since it had surplus electricity at that stage.
Cheap eletricity was the only reason why BHP Billiton built the plants in the first place. At that time the agreement was considered to be an excellent deal for utilising Eskom's surplus electricity.
Now roughly a decade later, Eskom cannot generate sufficient electricty for the smelters although Eskom commited to supplying the smelters to nearly 2030.
Even worse, Eskom's behaviour in this case suggests that it welcomes the campaign against the agreement.
It is surely not the way to treat an important foreign investor. (Incidentally, Eskom and BHP Billiton have already renegotiated the supply contract for the Mozal plant and another is under way for the Hillside smelter.)
This presents a situation where in the short term the renegotiation or termination of these supply contracts may play a significant part in alleviating the immediate electricity supply problems in the country.
It would also strengthen Eskom's financial position.
There is unfortunately a very expensive opportunity cost. In the long term South Africa urgently needs major foreign companies to develop labour intensive factories and mines.
Unfortunately Eskom's actions once again highlight the investment risk surrounding emerging countries, specifically South Africa.
In short, we have a lose-lose situation.
The Malema trial may have received much more media coverage but the significance of the Sake24 case was even raised at those proceedings.
Unfortunately not many reporters recognised the irony when the lights in the courtroom suddenly went out on the first day of the Malema trial.
Additional information:
In its Paia application Sake24 requested three items of information from the agreements between Eskom and BHP Billiton regarding the supply of electricity to the aluminium smelters in Mozambique and Richards Bay. These are:
• The formula for calculating the price that BHP Billiton pays for electricity at its Mozal and Hillside aluminium smelters;
• The duration of these contracts; and
• The names of the individuals who signed the relevant contracts on behalf of Eskom and BHP Billiton.
The application was not intended to force closure of the plants but to impart information regarding the matter in view of the overwhelming public interest and concern.
Judgement is expected in the first week of May.
This relatively simple Paia application drew a large number of lawyers and advocates to the courtroom, and also some journalists from other publications who opted to attend this hearing rather than the hate speech hearing of Julius Malema, ANC Youth Leader leader, in another court.
Although the application was fairly simple and the proceedings lasted only a day and a half, it once again highlighted the complex scenario of Eskom's (in)ability to provide electricity to the economy and the message this sends to foreign investors – investors that the government is trying to persuade to build factories and mines - to create employment.
South Africa is currently facing a situation where two smelting plants consume about 5.68% of the power that Eskom generates.
Sake24 surmises that BHP Billiton pays considerably less for this electricity than it costs Eskom to generate it, whereas ordinary citizens will be burdened with annual increases of 25% for the next three years.
South Africans are straining to subsidise the profits of one of the largest companies in the world, while there is a shortage of electricity in the country.
It is also interesting that Eskom did not oppose the application by Sake24.
The group says it submitted a significant amount of information to the court and it will abide by the ruling.
Even more interesting was the comment on Twitter by a senior journalist who attended the court proceedings that a senior Eskom employee had whispered to him that he hoped Sake24 would win the case.
One can only imagine how upset BHP Billiton must be about this. Eskom had been eager to clinch the contracts between them in 1995 and 2001 (for periods of up to 30 years) since it had surplus electricity at that stage.
Cheap eletricity was the only reason why BHP Billiton built the plants in the first place. At that time the agreement was considered to be an excellent deal for utilising Eskom's surplus electricity.
Now roughly a decade later, Eskom cannot generate sufficient electricty for the smelters although Eskom commited to supplying the smelters to nearly 2030.
Even worse, Eskom's behaviour in this case suggests that it welcomes the campaign against the agreement.
It is surely not the way to treat an important foreign investor. (Incidentally, Eskom and BHP Billiton have already renegotiated the supply contract for the Mozal plant and another is under way for the Hillside smelter.)
This presents a situation where in the short term the renegotiation or termination of these supply contracts may play a significant part in alleviating the immediate electricity supply problems in the country.
It would also strengthen Eskom's financial position.
There is unfortunately a very expensive opportunity cost. In the long term South Africa urgently needs major foreign companies to develop labour intensive factories and mines.
Unfortunately Eskom's actions once again highlight the investment risk surrounding emerging countries, specifically South Africa.
In short, we have a lose-lose situation.
The Malema trial may have received much more media coverage but the significance of the Sake24 case was even raised at those proceedings.
Unfortunately not many reporters recognised the irony when the lights in the courtroom suddenly went out on the first day of the Malema trial.
Additional information:
In its Paia application Sake24 requested three items of information from the agreements between Eskom and BHP Billiton regarding the supply of electricity to the aluminium smelters in Mozambique and Richards Bay. These are:
• The formula for calculating the price that BHP Billiton pays for electricity at its Mozal and Hillside aluminium smelters;
• The duration of these contracts; and
• The names of the individuals who signed the relevant contracts on behalf of Eskom and BHP Billiton.
The application was not intended to force closure of the plants but to impart information regarding the matter in view of the overwhelming public interest and concern.
Judgement is expected in the first week of May.
