Organised business, labour, community and government have officially signed a social compact in support of debt-laden Eskom that also endorses the need for a “just transition” for coal workers and communities as the electricity system begins to transition to higher levels of renewable energy and self-generation.
The compact, which at its core endorses the need to reduce Eskom’s unsustainable debt burden, was signed at the twenty-fifth annual summit of the National Economic Development and Labour Council (Nedlac).
Public Enterprises Minister Pravin Gordhan said the compact set out the steps required by each social partner to place Eskom and the electricity supply industry on a more sustainable trajectory, including mapping out a future for workers in the coal supply chain under a “just transition framework”.
Deputy President David Mabuza, who chairs the Eskom Political Task Team, added that the compact would also be an important vehicle for holding Eskom to account to rectify the problems of the past and to ensure a sustainable supply of electricity in future.
Describing the compact as “pragmatic and sensible”, Mabuza noted that it was accompanied by a detailed programme of action, with timelines for identifying innovative and cost-effective funding mechanisms to reduce Eskom’s debt and to access fresh capital.
At the end of March, Eskom’s total debt stood at R484-billion and the utility indicated that, unless the debt burden were reduced to about R200-billion, it would not be in a position to service either the capital or the interest on the debt.
The social partners indicate in the compact that they are “committed jointly to mobilising adequate financial resources for Eskom” and that the precise financing mechanisms would be evaluated taking into account all options available.
The associated implementation plan indicated that both the debt-reduction strategy and the plan for mobilising resources should be finalised within one month of the December 8 signing of the compact
“Finance mobilised will provide investors with appropriate long-term, stable and reliable social and financial returns, recognizing that workers rely on retirement funds for their sustenance upon retirement,” the compact stated.
It added that the resource mobilisation must be undertaken in a financially sustainable manner to ensure the country’s fiscal resilience and in a way that does not compromise the integrity of the financial system, including institutional investment.
That meant that any funding should comply with the mandates of financial institutions, the fiduciary duties of the institutions and the principle of risk-adjusted returns, while risk-management processes could not be weakened.
The Congress of South African Trade Unions (Cosatu), which initiated the compact process in 2019, welcomed the compact and the associated implementation plan, describing it as a historic moment.
The plan, Cosatu said, contained 35 key intervention areas to stabilise and rebuild Eskom, including:
- ensuring the security of workers’ jobs;
- tackling corruption and wasteful expenditure and holding the culprits to account;
- reducing a bloated management and their exorbitant perks;
- reviewing all contracts with Eskom to ensure that they are legal and affordable;
- establishing clear control systems to ensure quality coal is supplied to Eskom;
- compelling Eskom to enter the renewable energy generation space;
- putting in place clear just-transition processes to ensure that coal power stations and mines reaching the end of their lifespans were converted to other energy generation technologies, or repurposed for alternative economic activities;
- a debt recovery plan for all debtors, in particular municipalities and other large defaulters;
- ramping up investment in expanding energy generation capacity;
- placing Eskom on a sustainable debt trajectory so that it can prioritise investment in maintenance and generation expansion and thus reduce load-shedding;
- locally producing renewable energy technologies and components in areas where jobs were at risk; and
- producing electric and hydrogen-fuelled vehicles locally.
“Now that the Eskom Social Compact is signed, a dedicated task team should begin its work at Nedlac to monitor its implementation and hold all parties accountable. We cannot rely simply upon good wishes and neither can we afford for Eskom to fail,” Cosatu said in a statement.
Gordhan said that government was committed to act within the provisions of the social compact, including the restructuring of Eskom into three standalone units of generation, transmission and distribution.
He added that the recovery of Eskom was a “vital component” to government’s Economic Reconstruction and Recovery Plan, which had also been agreed at Nedlac as the blueprint for South Africa’s recovery from the Covid-19 pandemic.