Parliament – Delivering his second State of the Nation Address this evening President Cyril Ramaphosa acknowledged that state-owned power utility Eskom was in crisis and the risk it posed to South Africa was great.
For this reason, Ramaphosa said government will immediately start on a process of splitting Eskom into three different companies focusing on generation, transmission and distribution.
“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings.
“We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay,” said Ramaphosa.
He said in responding to the crises, government would minimise any adverse economic cost to consumers and taxpayers.
“As we address the challenges that face Eskom we will ensure that there is meaningful consultation and dialogue with all key stakeholders.
“We will lead a process with labour, Eskom and other stakeholders to work out the details of a just transition, and proper, credible and sustainable plans that will address the needs of all those who may be affected,” said Ramaphosa.
Eskom owes R419 billion and is struggling to service this debt while maintaining its infrastructure. For an example, the residents of Soweto collectively owe Eskom R17bn.
“We need to take steps to reduce municipal non-payment and confront the culture of non-payment that exists in some communities.
It is imperative that all those who use electricity – over and above the free basic electricity provided – should pay for it,” said Ramaphosa.
He said government will support Eskom’s balance sheet, and the Minister of Finance will provide further details on this in his Budget Speech.
“As we address the challenges that face Eskom, we also need to safeguard our national fiscal framework, achieve a positive impact on our sovereign credit rating, and pay attention to the rights and obligations of Eskom’s funders,” said Ramaphosa.
He said government supported Eskom’s nine-point turnaround plan which it wanted to see being implemented.
“In line with this plan, Eskom will need to take urgent steps to significantly reduce its costs. It will need more revenue through an affordable tariff increase,” said Ramaphosa.