Eskom Group CEO Dan Marokane shared his disappointment about the National Energy Regulator of South Africa’s (Nersa) decision to grant the power utility a lower tariff increase than what it had requested.
Marokane was speaking to delegates at the Investing in African Mining Indaba on Tuesday afternoon.
Nersa announced its decision to grant Eskom an average 12.74% tariff increase last week, which is well above inflation, but less than half of what Eskom asked for.
“The request that we placed before Nersa was a final attempt to help Nersa make a decision that allows the utility to move towards cost-reflective tariffs. It’s been on the table for quite some time. We’ve raised the issue that the kind of tariffs we have are too low for us to be able to invest in the upkeep of our assets.”
I’m optimistic that there is sufficient willingness now to tackle municipal debt
— Dan Marokane, Eskom CEO
He said given the maintenance costs that Eskom faced, there was often a reference to inflation-linked cost increases, but Eskom’s budget was under strain due to costs coming through from suppliers in mining among other things.
“We are disappointed, but we understand that the country and the economy cannot absorb these costs as it is. What we have to do now is get back to the drawing board and get back to the sustainability of Eskom in the long run.”
He said the utility's summer outlook in September last year indicated that to the extent that Eskom remained below 13,000MW of unplanned maintenance, South Africa could largely avoid load-shedding, but he said the country was not out of the woods yet.
“These are some of the risks that are still there in the system. This is the reason we have not pronounced the end of load-shedding and this is why we are focused on making sure we bring additional capacity [into the system].”
Marokane said the power utility was working with South Africa’s indebted municipalities for a solution to the towering debt that councils owe for electricity, which amounts to about R100bn.
He said the councils’ debt crisis was so significant that if it was not urgently resolved, it could wipe out the gains from the National Treasury’s R78bn Eskom debt-relief programme.
“The one risk that is huge is the issue of municipality debt. We need to arrest this as a matter of fact — R100bn or so by the end of the financial year, at that level. Any gains derived from the National Treasury programme will be totally eroded if this is not arrested.”
He said while the challenge was staggering, he was optimistic that the next round of discussions on municipal debt would yield a solution less drastic than cutting businesses and households off for the tardiness of councils.
“I’m also optimistic that there is sufficient willingness now to tackle municipal debt. In the next few months, we will be engaging our stakeholders on what we think is a win-win solution.
“Us running to the courts and the threat of switching off towns and cities does not work any more, because we will be switching off half of the country. Even in the economic hub, it doesn’t work. So we need to find a solution where everyone comes willingly to implement it and allows us to, in the first instance, arrest the increase in the debt and start working our way backwards to reducing [it].”
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