Eskom privatisation is 'fake news' - Gordhan

Eskom is aiming to complete the unbundling of its generation, transmission and distribution operations by December 2022, according to a new policy roadmap published by Minister of Public Enterprises Pravin Gordhan. 

Read what the minister announced at a media briefing in Pretoria on Tuesday below. 

The minister has brought the briefing to a close. The focus will now shift to what announcements Finance Minister Tito Mboweni makes on Wednesday afternoon about funding Eskom when he delivers the mini budget. 

Gordhan did not delve into how Eskom can relieve itself of its debt burden of R450bn, saying Mboweni would provide more information on this. He did say, however, that the issue of debt must be resolved soon.  

Mboweni will be presenting the medium-term budget policy statement in Parliament in Cape Town on Wednesday afternoon. 

The minister again returns to the point that administered prices - such as electricity - are too high. 

"There are high levels of inefficiency," he says. He adds that freight and port charges are also too high. 

He says the timeframe to resolve the utility's debt cannot be a "couple of years". He says it needs to be sooner than that. 

He notes that Treasury will on Wednesday give more information on the utility's debt, which is now at 15% of SA's GDP. 

"Monopolies by their nature are wasteful," he adds - in both the private and public sector. 

Gordhan reiterates that the power utility has to deal with its crisis and work on a new business model at the same time. 

"The change process and the crisis management process need to work together." 

He comes back to what he calls the key principle: cost-effective electricity for consumers. 

He says it is not sustainable for the economy that tariffs have gone up 500% over past 10 years. 

Gordhan brings his presentation to a close, says Eskom cannot remain as it is and must shift to a new business model. 

There will now be an opportunity for questions. 

Gordhan says REIPP contracts will be reviewed but did not provide much additional information. REIPP stands for Renewable Energy Independent Power Producer Procurement Programme.

He says there will not be too much focus on unbuding the distribution arm of Eskom at the moment, due to the complexities of how it would work. 

"There is a big more study that we need to do," he says. 

The three arms - distribution, transmission and generation - will all remain functional subsidiaries of an Eskom holding company. 

Gordhan, speaking about clean energy, said it would cost up to R200bn to retrofit SA's coal-fired power plants with clean technology. He says Eskom does not have money to do this

He says Eskom has started to "incrementally" install clean coal technology. 

He adds that investors want to see the government has a plan for Eskom The utility has about R450bn of debt. 

He notes that the state will meet with lenders in the future. 

The minister notes that the plan released today should be read in conjunction with the state's long-term energy blueprint, released 10 days ago.

Gordhan says damage that state capture caused within Eskom is "huge" and "systemic". 

He said it is more than stealing "a few billion". 

He says skilled people, particularly black professionals, were chased out of Eskom. 

This all resulted in a negative impact on the power utility. 

Gordhan notes there has been a movement away from fossil fuels and towards clean energy. He says he will introduce the concept of a "just transition" on Tuesday. 

He notes the paper to be presented includes input from multiple government departments, as well as from Eskom and others. 

He says the paper being released on Tuesday is to answer the question around how to again put Eskom on a solid financial and operational footing. He notes that Ramaphosa has previously said the debt-laden power utility cannot trade its way out of trouble. 

Gordhan notes that President Ramaphosa has previously said that Eskom is too big to fail, and government will take responsibility to fix it, including its finances. 

Eskom was forced to institute load shedding two weeks ago, which it blamed on boiler leaks and the breakdown of a conveyor belt transporting coal to Medupi power station.

This, it said at the time, was exacerbated by delays in returning units that were on planned maintenance to service, as well as low diesel and water stocks. The utility said on Monday that, while generating plant performance has improved, an unexpected shift such as an increase in unplanned breakdowns could result in load shedding at short notice.

The Minister of Public Enterprises, Pravin Gordhan, will at midday on Tuesday release government’s long-awaited Special Paper on debt-laden power utility Eskom.

The release of the paper comes a day before Minister of Finance Tito Mboweni will present the medium-term budget, and 10 days after the publication of the Integrated Resource Plan, the state's long-term plan for electricity generation.

Gordhan's office said on Monday that he will set out in detail a comprehensive roadmap for Eskom in a "reformed electricity supply industry". Gordhan is expected to give more information about plans to split Eskom into three entities: generation, transmission and distribution.