Not a real option

15th August 2014

By: Terence Creamer

Creamer Media Editor

  

Font size: - +

There would naturally be a menu of options under consideration for dealing with Eskom’s current financial problems – the State-owned electricity producer expects to become cash-flow negative by June next year and has indicated that its faces a R225-billion revenue shortfall over the five years between 2013 and 2018.

To be sure, asset sales would be part of the menu. However, a major break-up of the utility and the privatisation of some of its assets are unlikely to feature very highly among the options.

Public Enterprises Minister Lynne Brown confirmed as much last week when she described the privatisation debate as “misguided”, adding that it would be a “grave mistake to privatise this critical player in the economy”.

The Minister felt compelled to address the issue after yields on Eskom bonds surged, suggesting that bondholders had become nervous about what a break-up could mean for the security of their investments.

But such a dramatic restructuring is unlikely to be truly on the cards, as Nomura’s Peter Attard Montalto suggested in a note following the bond sell-off: “Expect the status quo to continue and the bond market should price that in.”

A key reason to expect the ‘status quo’ is that a downsizing would run counter to government policy and would certainly lead to a highly charged tussle within the already delicate tripartite alliance of the African National Congress, the South African Communist Party (SACP) and the Congress of South African Trade Unions.

Some commentators were convinced that privatisation was genuinely on the agenda again when SACP general secretary Blade Nzimande openly condemned those “vultures” pushing for Eskom’s privatisation.

It is quite possible, though, that the politically savvy Nzimande was merely building up privatisation as a “straw man”, knowing full well that the motion, should it even be raised in Cabinet, would be defeated. And once it was, he could hold it up as an example of the SACP’s continued influence over government, which some on the left believe has sold out by adopting the business-friendly National Development Plan. In addition, such a call would help unify a fractious alliance.

For her part, Brown said the intergovernmental task team, comprising the Department of Public Enterprises, the Department of Energy and the National Treasury, was working with Eskom and the National Energy Regulator of South Africa “to formulate a solution to the immediate challenges that Eskom is facing”.

To her knowledge, “Cabinet has not discussed the matter of privatisation and there is no need to unnecessarily raise temperatures around this matter”. Perhaps a word in the SACP’s ear might also help in that regard.

Edited by Terence Creamer
Creamer Media Editor

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION