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Lights are back on at Eskom

| Economic factors

For the first time in a decade, the real challenge of fixing the business is on the table

Jabu Mabuza, in his signature Panama hat, has blown into Eskom like a warm berg wind bringing rain to the Cape. In 10 days, astonishing things have been done: five executives are out with another two on the way; R20bn has been raised from funders that have shunned Eskom since October 2017; and the real problem of Eskom — its debt mountain and solvency issues — have been placed squarely on the table.

It made such a refreshing change from the obfuscation, lies and denial about the company’s true state of affairs by previous Eskom executives and chairmen that the air at Tuesday’s results session was almost celebratory.

All we need now is for Public Enterprises Minister Lynne Brown — who on Tuesday had the temerity to tell a parliamentary committee it was time for boards of state-owned companies (which she appointed) to "shape up or ship out" — to be called to account for her part in all of this and we will be on our way to being able to close this horrible chapter.

As Nersa has been saying for years: there is no short cut and the only solution on the tariff side is for Eskom to make a serious effort at managing costs

At the presentation, Mabuza and interim CE Phakamani Hadebe were frank about what they knew of the state of Eskom and what they were still finding out. Everything is under scrutiny, from contracts that look suspect to staff who do business with Eskom and the lifestyles of senior managers. There is also a commitment not just to remove people but to pursue them with criminal charges.

Most importantly, though, for the first time in a decade, the real challenge of fixing the business is finally on the table.

As can be expected of a new board and management, the first place their attention has fallen has been on revenue. Over the past five years, Eskom has consistently been granted tariff increases below the cost of generating electricity.

This is because the National Energy Regulator of SA (Nersa) has not been persuaded that the utility’s use of its resources has been efficient and can justifiably be recouped from the consumer. For all of us, business in particular, Nersa’s stance has been a relief. Had it granted Eskom’s most recent application, for instance, businesses would be paying 20% more for electricity in 2018, rather than the 5.5% that has been granted.

Mabuza says he wants to develop "a relationship with Nersa" that could persuade it of Eskom’s efficiency. Hadebe also spoke about "working with Nersa to find a future price path".

It may be that Nersa (and the public it protects) will be better disposed in the future to grant above-inflation increases for electricity with a new, cleaner regime in place. But a better disposed regulator will never, and should never, be the solution. As Nersa has been saying for years: there is no short cut and the only solution on the tariff side is for Eskom to make a serious effort at managing costs.

On the bigger picture – Eskom’s solvency issues – it is an enormous relief to have a board and a CE in place that have identified the problem and see it as their role to propose solutions to the shareholder.

For the ANC, which has blown hot and cold on "private participation" in state-owned firms (we still must not say the P-word, says Mabuza) for the past two decades, we may now out of necessity have an honest policy discussion.

The same goes for the broader liberalisation of the entire electricity sector.

The government can now look afresh at the policy positions on the role of private producers and the implications that a competitive market would have for the shape and form of Eskom. Whether it can and should be split up into generation and distributions functions is now a real, and not academic, debate.

Changing Eskom, especially at such a fundamental level, will be difficult.

But at last, the opportunity to have such discussions about the utility has arrived.

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