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Public enterprises like Eskom can't be treated like tuck shops – OUTA

Apr 16 2018 17:17
Lameez Omarjee

Cape Town – Public enterprises like Eskom cannot be treated like tuck shops where people can do as they wish, a civil rights body has told the National Energy Regulator of South Africa (Nersa).

Nersa will hear from the public from across South Africa over the next three weeks, with hearings commencing in Cape Town on Monday. The hearings relate to Eskom’s application for the regulatory clearing account (RCA) balance of R66.6bn, or clawback tariffs for three years dating back to 2014/15.

Nersa will consider the presentations made by the public and decide what the tariff hike will be, and how it will be phased in.

The Organisation Undoing Tax Abuse (OUTA) head of energy Ronald Chauke presented its recommendations, and emphasised that Eskom must be held accountable for the mismanagement of funds.

“Let us hold Eskom accountable. People can’t do what they wish with state-owned institutions. It is not their tuck shops to do as they wish,” he said.

OUTA is rejecting any tariff hikes for the RCA. Giving Eskom more money is a “waste of time,” Chauke said.

Eskom 'a black hole'

“Eskom is a black hole. You cannot throw cash at it, you will never trace that cash back again,” he stressed. “Let Eskom clean its house first, then we can talk about recapitalising Eskom.”

Nersa should wait for Eskom to implement its turnaround strategy before it can consider granting the power utility a tariff hike, which should not be more than 5.2%.

Any approvals should be subject to evidence of adhering to corporate governance, Chauke said. 

He explained that OUTA is concerned about the “serious corporate governance issues” and “rampant” corruption at the power utility.

Eskom is being probed by Parliament’s portfolio committee on public enterprises, as well as the state capture inquiry which is now under way.

The excessive cost overruns at Eskom are another cause for concern.

The root cause of the problem should be dealt with and this is Eskom’s business model which is not sustainable, Chauke explained.

OUTA believes primary energy spend on coal and diesel has been excessive at R100bn over the past seven years. According to OUTA, Eskom’s primary energy costs have grown from R18bn in 2007 to more than R82bn over 10 years.

“The current Eskom model is not fit for purpose,” he said. “I implore the Nersa board to take into account (that) Eskom does not have a money problem or a performance problem. It has historical, legacy structural problems. The Eskom business model is not right.”

‘Naughty’ Eskom guys

The organisation is also calling for increased oversight by the regulator, with Eskom regularly reporting to Nersa on more than just an annual basis.

Nersa’s tests of prudency, for example, should also be more rigorous. “[Eskom] must be more closely managed, the Eskom guys are naughty,” Chauke said.

He added that Eskom’s new leadership has an unenviable task ahead of it, and that hard decisions will have to be made. The leadership needs to institute stringent measures to recoup the billions siphoned from the utility through corruption and maladministration, Chauke said.

He suggested that leadership could recover R15bn within six months if it puts in place a properly-run project. 

Chauke said it is necessary for the Special Investigating Unit to probe Eskom's coal contracts and make sure that the monies are retrieved.

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nersa  |  outa  |  eskom  |  energy  |  electricity costs


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