Eskom and tariff hikes

Here we go – again.

 Don’t you just love the levels of professionalism and competence we have in South Africa?

1. Eskom removed the world-class skills base it inherited from its pre-1994 days by blindly following the ANC politically correct ideology of reverse affirmative action – it unceremoniously tossed out the white managers, engineers, technicians and linesmen who, rightly or wrongly, had comprised the bulk of expertise within the parastatal.
2. The removal of that skills base, whilst not done exactly overnight, took place over a very short period – too short to permit the recruitment and training of black replacements to the same levels of expertise, remembering that most of the white engineers and so on had served apprenticeships of several years followed by many years of on-the-job training and experience.
3. The ever diminishing numbers of competent personnel suffered increasingly low morale as the process continued and as they watched their world-class operation begin to disintegrate under the onslaught of unskilled time servers brought in through nepotism and racial quotas. “Hey, the government says we are equal and the only difference between us is that the whites have been privileged and we have not and, anyway, what’s so difficult about driving around in nice cars, having nice offices, having secretaries (oops, sorry, personal assistants), fat salaries, and so on. Skills? Aagh, we’ll pick those up as we go along – if we need them. Protestant work ethic? What’s that? We in the ANC and the new government of South Africa are socialist and communists – we don’t believe in that outdated and outmoded thinking since it is not politically correct (according to us) and, in any case, we are just taking over what was built up over generations by our predecessors.”
4. The new management of Eskom failed to understand and apply the concepts and lessons of investment in their inherited money-making machine. When, finally, the new management realised their mistake, they were too frightened of and politically indebted to their major stockholder (the ANC government) to be able to convey the severity of the developing crisis regarding the generation and distribution of electricity; nobody, it seems, was prepared to risk their lovely salaries, bonuses and related perks by being the too-earnest bearer of bad news to the powers-that-be that this wonderful cash cow was, in fact, on the brink of terminal starvation.
5. The ANC and its government officials failed to understand that the good days were on the point of coming to an end. The concept of long-term investment and re-investment totally escaped them. Things were going too well; the economy was proceeding nicely – how could anything be wrong? “To hell with these doomsayers – we, as the government have much more important things to spend money on. We must not delay, for example, spending hundreds of millions of Rands on re-naming towns, streets, municipalities. Anyway, if Eskom does need money later then we’ll look at it closer to the time – I mean, just how long can it take to build a few new power stations and the associated network? In the old days before 1994 we never seemed to have this problem, so how hard can it be?”
6. When, finally, the wheels came off the lumbering juggernaut that is Eskom, what happened? Because of the self-imposed ANC political perceptions of reality were far more important than the actual realities of life, both the government and Eskom, whilst simultaneously admitting a problem and downplaying the seriousness of that problem (admitting error is not a survival trait within the government, the ANC or Eskom), then proceeded to continue the export of substantial proportions of our power production to neighbouring countries – all previous allies to the ANC back in the days of the struggle against Apartheid.

Well, the chickens have well and truly come home to roost.

And in the process we have all been made to look utter fools to ourselves and the world at large. Once again we see that, with the ANC, its government and the various state utilities, style and spin are deemed to  be far more important and relevant that content. We can talk the talk but we’re buggered when we have to walk the walk.

 Now Eskom, with the support of the government, wants to hike its tarrifs by a stated 53%. Aware of the social and potential political fallout the ANC opposes the idea. As does COSATU. As do the bulk of businesses and private individuals. No great surprises there – except for the government’s stance.

Well, if the government is so supportive of the idea, then let the government pay for it.

1. The government is the main shareholder of Eskom.
2. The government failed (by its own – very surprising – admission) to respond in a responsible and responsive manner when, eventually, Eskom brought the problem to its attention.
3. The government has been deriving vast revenues from Eskom for years.
4. The government has failed to spend its budgeted allocations of those revenues through the inefficiencies and incompetence of many of its departments.
5. The government has been enjoying positive revenue balances for many years – partly because of Eskom’s contributions.

As with any other commercial or quasi-commercial enterprise – and especially in the case of a state monopoly – it’s all very well when times are good and you enjoy the huge dividends from your legislated market dominance, but there is an obligation to put your hand in your pocket when times are not so good.

The mere fact that Eskom is a state enterprise renders its revenues as indirect taxation. When that state enterprise turns a profit which is siphoned off into state coffers then that profit is additional (hidden) indirect taxation which is not declared as such. To have Eskom then to increase tariffs by a further massive 53% will subject the consumers of Eskom’s product (i.e. everyone in South Africa) to an undeclared indirect super-tax.

Forget the argument that South Africa has the cheapest electricity in the world. It is a spurious argument, at best. If we can produce electricity at the present price – and make a huge profit into the bargain – then let us benefit from that ability. If lower electricity prices can help to attract foreign investment into this country then let it be! We neither need nor want so-called parity pricing with other countries – it benefits absolutely no-one except traders, speculators and already well-established outside vested interests and whose secondary, derivative economic functions carry questionable economic value to anyone beyond themselves.

Let the government stump up the additional funds the Eskom now needs. The government has assumed the social role of providing the social service of electricity supply; it has enjoyed the spoils of that role and must now discharge its social duty of expanding that role at whatever cost is necessary. Moreover, the government has the moral obligation to the vast majority of its citizens who, even at current Eskom tariffs, can scarcely afford the minimum power they consume.

I just hope that the government has not seen this request for higher tariffs as an excuse to continue bilking the South African entrepreneur and consumer without exposing itself to losing those lovely revenues flowing into the Treasury…

Spearpoint.