President Cyril Ramaphosa will on Thursday announce plans to resolve the current power crisis that has again gripped the country, and has also pledged to address Eskom’s financial crisis.
The country’s public enterprises department warned on Wednesday that Eskom needs a cash injection by April to survive.
“We are working on a number of plans so we are able to address this collectively and we are going to be coming up with some announcements tomorrow,” said Ramaphosa, who is due to debate on the state-of-the-nation address in Parliament.
“We are going to be coming up with a number of announcements tomorrow and in the following week we will also address the financial aspect,” the president said.
In a Public Enterprises Portfolio Committee meeting on Wednesday (13 February), Eskom said that it is now technically insolvent and will cease to exist at the current trajectory by April 2019.
It added that it currently faced R420 billion in debt and that its default risk was a threat to the economy.
The increase of employees and costs at the power utility also came under scrutiny after Eskom said that employee costs had increased significantly, driven by employee benefits.
In its report, the power utility said the number of its employees had increased from 32,000 in 2007 to 48,000 in 2018, with associated costs growing from R9.5 billion for R29.5 billion.
Eskom’s build programme was also scrutinised.
Its Medupi and Kusile power stations have suffered massive delays and cost overruns due to poor planning, poor engineering designs, poor procurement practices and corruption. These issues meant that the costs for the plants have escalated significantly to over R300 billion.
Public Enterprises Minister Pravin Gordhan said that the Eskom Board will appoint a panel of experts to do an assessment of all the power supply challenges that the utility has encountered over the past few days.
Addressing MPs in the National Assembly on Tuesday, Gordhan said Eskom is currently faced with massive problems – structural, operational and financial.
“What is the plan? We met the board and senior management [on Monday]. The board must institute an urgent review to establish when, realistically, Medupi and Kusile will be completed, and also to determine the extent of design and other operational faults; and what steps can be implemented to minimise escalating costs and what can be done to increase output.
“The board will appoint a panel of experts to compile an in-depth, independent audit to ensure that every technical problem is understood,” he said.
In his State of the Nation Address last week, the president said bold decisions needed to be taken to address the crisis at Eskom, as it posed a risk to the country that could severely damage the economic and social aspirations.
The president said Eskom would need to develop a new business model to minimise any adverse cost to the consumer and the taxpayer.
This would see three separate entities being established – Generation, Transmission and Distribution – under Eskom Holdings, while at the same time, the three remain the property of the State.
As Eskom carries on with load shedding, Gordhan said units at several power stations, including Arnot, Kusile, Kriel, Duvha, Matla, Medupi and Grootvlei, were not in service.
“The losses to generation capacity have amounted to thousands of megawatts,” he said.
In sample terms, he said that on Tuesday, the supply availability stood at 29,711 MW against a demand of 27,633 MW. At peak hour – when most South Africans were using electricity, demand went up to 30,033 MW against the available power of 27,305.
Gordhan said the reason this is happening is the wrong choices were made and the wrong designs were introduced at Medupi and Kusile, and that they are not performing.
He said the construction costs have escalated to be three times higher and that the two power plants are seven years late and regularly tripping.
“Medupi and Kusile were meant to add substantial generating capacity to replace older power stations – they are not performing.
“[On Monday] seven power units tripped within five hours. This is an emergency or crisis last experienced in 2014/15. The dependence on diesel as an emergency measure is expensive and supplies are unreliable. This is not sustainable,” he said.
Calls for international experts to return home to rebuild Eskom
In order to urgently address the operational problems at Eskom, chief amongst which is generation, Gordhan and Eskom chairman Jabu Mabuza, have called on ENEL, one of the world’s leading energy suppliers, to provide the power utility with external technical assistance.
ENEL will send two or three coal power station engineers to South Africa shortly.
Over the years, Gordhan said, Eskom has also produced a number of top engineers, many of whom left Eskom during the period of corruption and State capture, and are now working in countries like Tunisia.
“In the spirit of Thuma Mina, many have indicated their desire to return home and contribute to the rebuilding of Eskom.
“These experts will, amongst other things, conduct a full operations audit of all power stations to give us and the board an independent view of where the most serious problems are.
“They will also train, mentor and transfer skills to a younger generation of Eskom engineers so that we build a capable team to run our electricity system into the future,” said Gordhan.