Budget speech 2019 Mboweni

Finance Minister Tito Mboweni (right) DG Dondo Mogajane, January 25, 2019 / Image via Twitter: @tito_mboweni

Budget speech 2019: Mboweni must answer the Eskom question

Unbundling may save the power utility but it’s imperative that the disease of corruption, mismanagement and unethical practice be amputated prior.

Budget speech 2019 Mboweni

Finance Minister Tito Mboweni (right) DG Dondo Mogajane, January 25, 2019 / Image via Twitter: @tito_mboweni

The 2019 budget speech is expected to usher in a New Dawn for Eskom – expanding on an unbundling strategy which promises to pull South Africa out of protracted darkness.

Over the year’s Eskom’s death rattle has waxed and waned between a feeble whisper and a nightmarish roar. Years of neglect, corruption and mismanagement have plunged the power utility to ghastly new depths. The list of failures presented by the embattled state owned enterprise read like a report card of a child who’s skipped every single class.

The problem is that, in this comparative example, a dereliction of duty would, under normal circumstances, result in swift action – rebuking of privileges, or the foreboding wooden spoon. Unfortunately, the ruling African National Congress (ANC) – effectively being the parent – has allowed this disobedience to swell. To say the relationship between Eskom and the public is one of severe dysfunction would be putting it lightly.

Despite exorbitant government bailouts, high-level inquiries and imported engineers – Eskom continues to throw its toys. These tantrums have the propensity to cripple South Africa – to cloak the country in the cold shadow of the utility’s ineptitudes, leaving industries to ruin as the socioeconomic gears grind to a halt.

Eskom’s cold shadow of incompetence

Towards the end of 2018, load shedding made an unholy reappearance – a tangible manifestation of years of malpractice, menacing in its resurgence. A nine-point emergency plan to save Eskom from complete collapse was quickly implemented – a panel of experts, equipped with facts, figures and strategies, flooded boardrooms at Megawatt Park. Public Enterprises Minister Pravin Gordhan, who revoked Festive Season leave for senior executives and engineers, ended up, almost singlehandedly, affording South African’s an empowered holiday period.

It didn’t last long – less than two months, to be exact – before Eskom started to groan under the weight of its own inglorious maintenance programme. Just before the power utility began to ‘lose’ vital generating units, as if by some sort of prophetic wisdom, President Cyril Ramaphosa announced a massive shake up in the shadowy realm of Eskom.

The call for privatisation – born out of public frustration with flailing state owned enterprises – has grown into a fierce roar. You’d be wrong to think this was populist rhetoric, though. The battle, both for and against privatisation, is becoming brutal, with Ramaphosa’s latest strategy to save Eskom only amplifying the dissidence. At this stage, there are more questions than answers. South Africans are looking to Finance Minister Tito Mboweni to elaborate on the plan.

The unbundling of Eskom

Understanding Eskom’s dire predicament makes the call for unbundling easier to comprehend. Besides being R420 billion in debt – and taking that out on the public in the form of exorbitant tariff increases – Eskom’s days, under its current structure, are most definitely numbered. The breaking up of Eskom into three separate entities, may, on the surface, seem as an adequate antidote. Analysts have advised to proceed with caution. Trade Unions have vowed to fight the process. South Africans, in general, are left in the dark.

Despite threats of immediate retaliation from the Congress of South African Trade Unions (COSATU), Ramaphosa is forging ahead with the plan. As explained during his State of the Nation Address, Ramaphosa outlined the strategy in brief:

“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings.

This will ensure that we isolate cost and give responsibility to each appropriate entity.

This will also enable Eskom to be able to raise funding for its various operations much easily from funders and the market.

Of particular and immediate importance is the entity to manage an independent state-owned transmission grid combined with the systems operator and power planning, procurement and buying functions.

It is imperative that we undertake these measures without delay to stabilise Eskom’s finances, ensure security of electricity supply, and establish the basis for long-term sustainability.”

Not wasting any time, Ramaphosa has already appointed a Special Cabinet Committee on Eskom, featuring the ministers of public enterprises, energy, finance, transport, intelligence and police. Deputy President David Mabuza has been appointed as leader of the committee – an executive decision, undertaken by Ramaphosa himself, which has not been free from critique.

The fundamental ethos behind the unbundling strategy is to lighten the gargantuan load currently suffocating the antiquated company by distributing responsibilities across three decentralised entities. It’s expected to increase efficiency and accountability – pillars of sustainability which have crumbled by the wayside in recent years.

Still, the details are murky and, as is so often the case, uncertainty breeds contempt. Will the unbundling of Eskom be the silver bullet and, if so, at what cost?

Budget speech 2019 to reveal answers

Of all the information that is due to be divulged during Finance Minister Tito Mboweni’s 2019 budget speech, the Eskom saga, and the generally sordid condition of South Africa’s parastatals, will undoubtedly receive the most attention.

Mboweni is expected to shed some light on the unbundling process – at least in the financial sense. While in theory the unbundling process sounds positive – barring the evils of privatisation as proposed by trade unions – in practice, the strategy is sure to come with a hefty price tag. The financial price to pay may, at least in the short to medium term, further embattle the country’s uneasy economic prospects.

These concerns are valid. Already, Eskom’s executives receive massive salaries, exorbitant bonuses and a long list of professional perks – all while their company is teetering on the brink of collapse. If the entity is effectively split into three – would that mean three separate subsidiary boards, all with their own executive structures, all with their own penchant for personal profit?

The main question posed by analysts and opposition parties is simple: wont splitting up a flailing Eskom just create three separate failures, marred by the same old disgraces and ineptitudes?

It’s a fair question to ask. Indeed, logic and best practice points to a different approach – one which identifies and rectifies the root of Eskom’s evils. Unbundling may save the power utility but it’s imperative that the disease of corruption, mismanagement and unethical practice be amputated prior – otherwise the infection will spread, distributed amongst smaller entities, no nearer to being cured.

While Mboweni is unlikely to provide answers to questions regarding the practical mechanisms involved in the unbundling and subsequent operational mandates of each separate entity– cost effectiveness and the return on investment is surely to come under scrutiny. During the National Budget Speech, Mboweni will need to answer, either directly or indirectly, whether the cost of saving one giant catastrophe will be less than restructuring and revitalising three smaller, yet equally vital, entities.

His answer, though it may be brief, will speak volumes.