This article presents some of the often-overlooked impacts of Eskom economic priorities on the social and environmental conditions of South Africa. It concludes with a list of demands to assist the South African power utility in moving beyond compliance with the nine principles outlined in the United Nations Secretary General Global Compact 6 initiative to true socially and environmentally sustainable development.
Eskom generates over half the electricity produced in the whole of Africa and aims to extend its transmission grid into neighbouring sub-Saharan countries. With a generating capacity of over 40, megawatts, it is one of the largest utilities in the world. Eskom's vision is to " provide the world lowest cost electricity for growth and prosperity.
Eskom also owns and operates the national transmission system, a power line network measuring over , kilometres which transports electricity throughout South and Southern Africa.
It sells energy directly to some 6, industrial, 18, commercial, 70, agricultural and 2. In addition, Eskom operates 13 coal-fired power stations, a 1,megawatt nuclear power station, two gas turbine facilities, two conventional hydroelectric plants, and two pumped-storage stations in the Drakensberg and the Western Cape.
Coal is the major fuel source used by Eskom, and will remain so for the foreseeable future. Eskom receives its coal at rock bottom prices because the high volume of supply contracts awarded to coal companies allows them to sell non-export quality coal cheaply. Eskom has standard industrial tariff agreements with a host of different companies throughout South Africa.
It also has commodity-linked pricing agreements to supply electricity to the aluminium, ferrochrome and other energy intensive industries. Due to large and relatively easily recoverable coal reserves and lax environmental regulation, the cost of South Africa's electricity is of the lowest in the world.
However, by , due to its programme to increase capacity, Eskom had a foreign debt of 7. Thus the cost of government plans to provide abundant cheap electricity to stimulate economic development and investment has been borne by all South Africans. But none of the benefits found their way to the homes of the majority of citizens Bond While abundant sources of cheap energy represent an important comparative advantage for South African industries, this low cost is attributable, at least partly, to the lenience of environmental regulations.
Furthermore the low price of energy provides users with little incentive not to overconsume. The heavy reliance on coal for the country's energy means that the environmental impacts are generally more severe than they would have been if the economy were based on other energy sources. In the UN Global Compact the Secretary General asked world business to support a precautionary approach to environmental challenges Principle seven and encourage the development and diffusion of environmentally friendly technologies Principle nine.
However, in violation of these principles, Eskom continues its intensive efforts to develop a South African nuclear Pebble Bed Modular Reactor PBMR - a mini-reactor, which is being hailed by the company as the safest, cleanest, and most cost efficient nuclear power source. Eskom has attempted to cast the reactor as a global climate saviour, exploiting concerns over global warming by misrepresenting itself as a carbon-free electricity source and least cost carbon mitigation option.
Anti-reactor sentiment is growing, with support from the National Union of Mineworkers and other major South African unions, Southern African Development Corporation and International organisations. It siphons off resources from other priority areas such as bringing power to all urban and rural communities and cleaning up emissions from the coal-fired plants. Despite growing public opposition, Eskom hopes to obtain South African government approval for the project.
The South African government is in the process of finalising a blueprint to restructure and partially privatise South Africa's 21 billion rand power sector.
Among the key aims of restructuring process are to improve the financial health of the industry, bolster the quality of service and supply and ensure electrification targets are met.
Public ownership, they say, allows the state to drive universal service provision, ensure that electricity contributes appropriately to overall energy and industrial policies, and determine affordable pricing structures. Private ownership or a more commercial operating structure would shift Eskom's focus towards profit maximisation at the expense of social objectives.
The privatisation proposal forms part of a broader restructuring effort that, according to the Government's own consultants, will raise the cost of electricity to households by between 22 and 50 percent. The proposals appear to aim almost exclusively to raise funds by selling public assets. The future involvement in African markets outside South Africa that is the SADC countries connected to the South African grid and the rest of Africa is limited to those projects that have a direct impact on ensuring security of supply for South Africa.
To provide electricity in an efficient and sustainable manner, including its generation, transmission and distribution and retail. The company also has a developmental role and will promote transformation, economic development and brad based black economic empowerment. To provide sustainable electricity solutions to grow the economy and improve the quality of life of the people in South Africa and in the region.
Competent management was another critical success factor, they had already identified the talented individuals for senior management level. Further critical success factors were a transparent and fair process, and the alignment of performance management, rewards and incentives with required behaviours and outputs.
The plans they had made were internal, but there were external forces that would have an impact on their business plan. A serious challenge facing Eskom Enterprises was the establishment of a second network operator.
The business plan was also dependent on the timely disposal of their non-core businesses and their ability to plough back proceeds from non-core businesses into the business.
Dr Banda ensured the committee that transformation was not a side issue for them and that management recognizes its importance. Discussion The chairperson said that this meeting could only be the beginning of a process and that there was a need for another meeting for more meaningful engagement, since the committee only received the document at the meeting, giving them no time study it.
Dr Banda apologized that the committee only received the document on the morning of the meeting. He explained that, since the meeting was public, he could not provide sensitive financial information. A closed meeting would be more appropriate. It was critical to see Eskom Enterprises within the context of the Eskom group. He w also not be able to answer all the questions, but would provide feedback at a later date. A member asked for a breakdown of the 48 businesses that Eskom enterprises inherited.
She asked what feedback Eskom Enterprises got from labour and what impact workers had made regarding transformation. She also questioned profitability and stressed that profitability went hand in hand with development, and that one would like to see Eskom unpacking new ventures. How was expansion in Africa taking place and how did Africa benefit?
Dr Banda could not answer all of the questions. He mentioned that the views of transformation were that of the management. He would provide further detail in future. Mr Theron DA asked for more detail on the non-core businesses and asked what programs had been developed and planned addressing the skills shortage. Dr Banda said that they were addressing the shortage of skills issue by Eskom's involvement in a consortium that dealt with the problem, and that they had developed a training program to ensure the necessary skills.
An IFP member asked what plans they had regarding Black Economic Empowerment BEE , especially regarding the so-called "mothball" power stations power stations that had been neglected. He also wanted to know why the power station built sixteen years ago was not generating to full capacity. Dr Banda said that BEE played a central role in the improvement of the "mothball" power stations.
He could not answer why the power station was not functioning at full capacity. Mr Rhoode asked whether any jobs would be lost or if they would be taking on more jobs. He also inquired after Eskom's research and development program. Dr Banda said that jobs would only be shed as a last resort, and in the businesses that grow, more people would be employed.
He also said that research and development were dropped, but that they must be profitable and that research and development was in nature not profitable. It places undue stress on the company. Dr Kompela ANC mentioned that the president promised people a certain percentage of free electricity and that Eskom had never respected the president's undertaking. He enquired whether there were any problems. He also wanted to know if Eskom was doing as Minister Jeff Radebe told them to and to whom the 48 businesses were accountable.
Dr Kompela asked if they had invested in other companies, and if so, who these companies were. Dr Banda deferred the question regarding the president's promise to the managing director of the Eskom group. Minister Jeff Radede held the board accountable for Eskom Enterprises. Dr Banda would provide feedback on the other issues in the future. The Chairperson reminded the committee that the aim of the meeting was to provide a broad overview, and that Dr Banda could not have anticipated all of these questions, and would therefore be unable to address some of these issues.
A member mentioned that she appreciated the expansion into Africa, but that 'charity begins at home', and that there was a lot to be done in South Africa. She also mentioned that Eskom had a mandate to do human resource development, and that Dr Banda did not mention this mandate. Dr Banda said they were aware of the risks involved on the African continent but that they were moving forward nonetheless, with the mandate of the government and Nepad.
Dr Banda said that there clearly was a lot more information to be submitted. The Chairperson said written submissions should be made to the committee clerk. Mr Theron asked what the impact on the personnel of the business that would be sold or privatized would be. Dr Banda said that they would only sell businesses that were viable, so the impact on personnel would not be great.
A member inquired about a cabinet decision on restructuring and the progress Eskom had made in this regard. Dr Kompela mentioned that a newspaper reported that the plan presented by Dr Banda was already implemented. Dr Banda assured him that this was not the case. Dr Kompela also expressed that he was uncomfortable with the plan, and that transformation was a political agenda. Dr Banda acknowledged that transformation was a political process. The Chairperson said that the responsibility of the committee was oversight and that they had a responsibility to ask for clarity from Minister of Public Enterprises.
A member asked about the constitution of the board of directors and if they intend to reconstitute the board. Dr Banda said that their annual general meeting had been held, and that the board's tenure had been confirmed for the following year.
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