Vavi: South Africans Shouldn’t Pay the Price for Eskom Corruption

https://iframe.iono.fm/e/1593525?layout=modern” width=”100%” height=”170″ frameborder=”0

You can also access this podcast on iono.fm here.

JEREMY MAGGS: For many in South Africa, Eskom has come to symbolize failure and corruption. Once again, ordinary citizens are shouldering the burden. The state-owned utility is advocating for increased tariffs while households and businesses contend with a fragile economy. But why should citizens have to face the fallout of mismanagement, fraud in tenders, and, in many cases, outright plundering?

Listen/read: ‘Corruption ultimately makes the poor pay’ – Andy Mothibi [May 2024]
Read: Nersa confirms R54bn secret settlement with Eskom

This concern has been voiced by the South African Federation of Trade Unions [Saftu], with general secretary Zwelinzima Vavi arguing that this is unacceptable. Zweli, why do you believe citizens are unfairly bearing the costs of Eskom’s corruption? What’s your principal argument?

ZWELINZIMA VAVI: We are incredibly disappointed and frustrated that the individuals identified by the Zondo Commission as partly accountable for our current crisis are the very same people we are expected to regard as “honourable members” of Parliament. That’s what drives us mad.

These same individuals have a lot to say regarding the crisis we’re facing. Look, Jeremy, over the past 16 or 17 years, there’s been a tariff increase of over 500% at Eskom—unprecedented, completely shifting the crisis burden from its creators to ordinary people: small enterprises, the unemployed, marginalized communities, and even large corporations. The implications are becoming too much to bear.

Read: Major power users urge Nersa to revisit Eskom tariff determination

Not a day goes by without news of shutdowns or job cuts from companies, big and small. Twelve thousand jobs have vanished from South African smelters. ArcelorMittal South Africa is on the brink of collapse, and many others are claiming they cannot sustain operations. The unsustainable costs inflicted on companies due to Eskom’s failures are a driving factor.

We are outraged by this situation.

We are now looking at nearly a 9% increase for the next year and the subsequent two years, which is three times the inflation rate.

ADVERTISEMENT

CONTINUE READING BELOW

As you know, municipalities impose their own charges—some are at 10%, while others reach up to 14%—pushing our overall increase to around 18% or 19% consecutively. This cannot continue.

JEREMY MAGGS: You mention an intolerable burden. Yet Eskom claims to have a debt relief strategy aimed at protecting consumers. I assume you disagree with that claim.

ZWELINZIMA VAVI: Absolutely. We assert that the entire structure of Eskom has become unmanageable. It is simply unacceptable to expect citizens to finance corruption through these excessive payments.

For instance, we argue that Eskom’s R400 billion debt arose from cost overruns and significant corruption associated with Medupi and Kusile, forcing us to pay billions to the World Bank.

This is why we demand that these amounts be classified as odious debt, implying that the World Bank knowingly financed corruption linked to Medupi and Kusile, which ultimately benefitted the ruling party via Chancellor House—facing scrutiny internationally yet evading accountability here in South Africa.

Read: Chancellor House made 5,000% return on Hitachi investment – Sec [Oct 2015]

The victims of this corruption are not overseas; they are right here in South Africa.

JEREMY MAGGS: Ironically, could you now find yourself in agreement with Business Leadership South Africa [BLSA]? Its CEO, Busisiwe Mavuso, argues that Eskom’s pricing structure protects the utility from cost discipline while penalizing consumers. She claims the solution lies in accelerating a competitive electricity market. Do you concur?

ZWELINZIMA VAVI: She’s spot on with the first assertion, but mistaken on the latter. Technically, we are already in a competitive market. Eskom is presently subsidizing independent power producers (IPPs) by about R20 billion a month. This is a form of covert privatization.

Read: Eskom’s pricing makes urgent competitive markets necessary

Eskom was restricted from deploying renewables for a while, allowing IPPs to fill that gap and inject competition.

Eskom’s balance sheet reflects that this arrangement costs us R20 billion in subsidies for IPPs.

That’s unjust, especially since Eskom sells electricity to them at inflated rates.

We are calling for transparency regarding the contracts established with these IPPs, demanding public disclosure and a comprehensive parliamentary investigation into why these agreements have remained undisclosed for so long.

JEREMY MAGGS: Can you clarify to what extent you believe the blame should rest on the National Energy Regulator of South Africa [Nersa]? They have had to revise tariff increases after a miscalculation. Do they hold any responsibility?

ZWELINZIMA VAVI: Indeed, they do. This represents a case of regulatory capture. They’ve acted like “Yes, boss. Yes, ma’am” to Eskom, never questioning how sustainability is achievable when the utility requests annual tariff hikes of 20%, 25%, or even 30%.

Read: Nersa’s errors will impact you severely
Listen/read: Eskom’s new tariff plan will shock solar users

Even though they hold public consultations, they’ve never drawn a line or demanded accountability from Eskom regarding its structure, sustainability, or efficiency. We should be discussing coal procurement—how much local companies charge and why it’s so expensive when South Africa has abundant coal reserves.

Nersa isn’t raising these critical questions, and we are deeply concerned. This is what we refer to as regulatory capture.

JEREMY MAGGS: Zwelinzima Vavi, general secretary of the South African Federation of Trade Unions, thank you for sharing your insights.

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.