Eskom’s rolling blackouts — 26 years of ANC meddling, manipulation and vested interests

26 Jan 2023

When President Cyril Ramaphosa tells the ANC faithful at the Free State elective conference he’s asked Eskom to suspend the statutorily approved 18.65% electricity price hike, he continues the political interference that’s marked the governing party’s relationship with Eskom in particular, and with state-owned enterprises in general.

It’s a toxic swirl of blurring the lines between party and state, vested interests and electoral populism, now with a firm eye on the 2024 elections when rotational power cuts are set to be a central electioneering tool. That churn has continued regardless of expert advice, presidential committees’ and others’ recommendations and more.

It all goes back more than two decades — to late 1996 when the governing ANC first looked at Eskom with a view to bringing the power utility — which had served apartheid white South Africa and the mining and manufacturing industries — firmly under state control.

“Eskom is not vested within the government. Therefore, legislation is necessary to place the entity under government control and this should happen early next year,” the then public enterprises minister, Stella Sigcau, was quoted as saying in the Mail & Guardian in late 1996.

The 1998 Eskom Amendment Act was followed by the 2001 Eskom Conversion Act, which made the power utility the public entity it is today, Eskom Holdings Limited, with the public enterprises minister in a shareholder compact with this state-owned enterprise (SOE).

That properly ended the power utility’s status as a self-financing entity funded from debt and accumulated reserves and, according to its 1992 Annual Report, with 44,142 employees. By 1995 the Eskom reserves stood at R18.8-billion, with assets of R43-billion and debt at R27.2-billion, according to the power utility’s Statistical Report then.

All this came on the back of a politically sussed Eskom that had read the changing political winds; from late 1994 it had integrated the former TBVC (Transkei, Bophuthatswana, Venda, Ciskei) Bantustans’ power grids, and announced a mass electrification programme targeting 700,000 black households by 1997. Meanwhile, the Reconstruction and Development Programme (RDP) in 1996 set a target of electrifying 2.5 million households by 1999.

By the time the Eskom Conversion Act became effective, new investment should have been made in the electricity and energy supply side, according to the wide-ranging — and widely well-received — December 1998 Energy White Paper, the government’s official policy statement approved by Cabinet.

The unbundling plan

Talking about affordable energy, improved governance and tighter regulation and diverse supply, including independent power producers, this document proposed that Eskom be unbundled into transmission, generation and distribution entities — “initial exploratory steps will include the unbundling of Eskom’s generation and transmission groups”.

Such a plan re-emerged in the October 2019 Eskom Roadmap released by now Public Enterprises Minister Pravin Gordhan. This plan is now running many months behind schedule; while the transmission division is established as a separate entity, its board has still to be appointed.

Movement on the other roadmap’s milestones remains sticky, as Eskom’s debt stubbornly hovers around R400-billion. In July 2018, the then ANC treasurer, Paul Mashatile, said there were discussions about an Eskom debt-for-equity swap of some R120-billion, possibly with the Public Investment Corporation (PIC), the government’s manager of R2.5-trillion in employee pensions and social savings.

“It’s top of the agenda at Luthuli House. We have to get the economy right and be able to create the necessary employment, particularly for young people,” Mashatile told the Cape Town Press Club then, followed by various officials signalling for a debt-equity swap.

It didn’t happen. Instead, Budget 2019 provided Eskom with an amortised R250-billion bailout in annual instalments over a decade. Another bailout — or in the preferred government jargon, cash injection — for Eskom’s stubborn R400-billion debt, is expected in Budget 2023.

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Back to the 1998 White Paper that the governing ANC left in limbo after protests from, among others, its alliance partner, the labour federation Cosatu. Ditto, the ANC stalling on SOEs’ role in the developmental state — from the August 2000 Cabinet-approved policy framework on “accelerated agenda towards the restructuring of SOEs” to the 2012 presidential SOE review committee. Recommendations of rationalisation, better governance and adequate funding were repeated across all.

Instead, what unfolded in the early 2000s was the ANC’s establishment of its investment arm, Chancellor House, with interests in energy, mining and IT. Named after the Joburg downtown law offices of Nelson Mandela and Walter Sisulu, its establishment was wrapped up in 2003 under the term of then ANC treasurer Mendi Msimang.

It took until November 2006 for Chancellor House to hit the headlines. Then the Mail & Guardian exposed its targeting of sectors where the government was readying to allow large-scale procurement.

On the energy front, Chancellor House secured a 25% shareholding in the local subsidiary of Hitachi Power Africa. That came at a time when moves were under way in the government to finally catch up on the much-ignored and delayed action to bring on additional energy and electricity supply.

With the 1998 White Paper 2000 deadline for extra, diverse and affordable energy supplies ignored, by 2004 Eskom, and others, including then public enterprises minister Alec Erwin, told Parliament in public, and no doubt Cabinet in private, that new sources of energy were urgently needed because capacity was running out.

Kusile and Medupi

In 2006, Kusile and Medupi, the largest new-build power stations in South Africa, designed to bring on board a total of 9,600MW, were loading. By 2007, when construction began, it emerged that Hitachi Power Africa got the largest contract on this new build — as did its 25% shareholder, Chancellor House.

A total of $5-million was paid in dividends to Chancellor House, effectively the ANC, according to the US Securities and Exchange Commission charges against the Japanese Hitachi parent company for the “inaccurately recorded improper payments to South Africa’s ruling political party in connection with contracts to build two multibillion-dollar power plants”.

In September 2015, Hitachi paid $19-million “to settle” charges the US Securities and Exchange Commission brought under the Foreign Corrupt Practices Act for the arrangement that “gave the front company and the ANC the ability to share in the profits from any power station contracts that Hitachi secured”, according to the commission’s statement at the time.

Today, Medupi and Kusile are almost a decade behind the 2014 completion schedule, and each is tens of billions of rands over budget, with design faults continuing to bedevil timelines and budgets.

In 2007, widespread rolling blackouts hit South Africa — and have continued to do so ever since. Today’s rotational power cuts that hit every day so far this year — and over 200 days in 2022 — have left South Africans going for up to 12 hours a day without power. Small businesses are buckling, and hospitals, courts and home affairs offices struggle with enforced downtime, while the citizenry’s health is jeopardised as water and sewage treatment fail.

Jacob Zuma’s presidency

The Thabo Mbeki presidency pretty much ignored calls for energy and electricity investment until the last innings as Mbeki was recalled by the ANC in September 2008. The governing ANC had long been roiling internally ahead of the 2007 Polokwane conference where ANC deputy president Jacob Zuma was elected as party president, ready for the Union Buildings.

The Jacob Zuma presidency facilitated Eskom’s looting, as at other SOEs, through a series of deals, middlemen and facilitation fees — mainly, but not solely, by the Gupta brothers and their business partners. International consultancies and auditing firms stepped into State Capture, giving the prevailing dynamics that facilitated making money hand over fist.

Eskom became a revolving door of executives and board members, key interventions that are the sole prerogative of the government, which since 1994 has been the ANC. A crucial moment was the appointment of the 2014 board, and the subsequent suspension of then Eskom CEO Tshediso Matona, a veteran public servant, alongside three senior executives in Lynne Brown’s stint as public enterprises minister.

“In the case of Eskom, Ms Lynne Brown participated in state capture by using the powers of her office to help remove from Eskom executives that were seen as unlikely to cooperate with the Guptas, to install persons as members of the Eskom board of directors, who would facilitate or at least not oppose the Guptas’ state capture scheme and appointed Eskom executives who would cooperate with the Guptas,” according to the Zondo State Capture commission report.

Matona’s successor, Brian Molefe, was a key focus in November 2016 when then Public Protector Thuli Madonsela’s State of Capture report talked of “persistent allegations” of Molefe’s cosiness with the Guptas.

“It is worth noting that such allegations are backed by evidence and a source of concern that nothing seems to have been done regardless of the duty imposed by section 195 of the Constitution on relevant state functionaries,” said that report, which ultimately led to Molefe tendering his resignation from Eskom later the same month while dismissing the findings as “in accurate [sic]” and/or “unsubstantiated”.

Predating the Zondo State Capture commission report, the 2018 parliamentary Eskom State Capture inquiry found Brown and fellow one-time public enterprises minister Malusi Gigbaba “grossly negligent”.

The Zondo Commission of Inquiry into State Capture ultimately bore testimony to how Eskom, and other SOEs, were hollowed out and the institutional cultures twisted. As Eskom CEO Jabu Mabuza testified in early 2019: “I learnt that the name is corruption but the game is procurement.”

Today little seems to have changed.

Talk of sabotage

“The criminality is quite well organised and well embedded,” Eskom CEO André de Ruyter told MPs on 24 January 2023. Aside from rocks and metal bits regularly found in coal headed to mills to trigger urgent maintenance call-outs, he recounted how three procurement officials recommended a R430-million contract to an individual who after due diligence was found operating from a Germiston suburban home, with a default judgment for falling behind with bond payments and a repossessed car. All procurement officials were suspended, and one left within 24 hours.

Talk of sabotage within Eskom seems to have receded as talk of sabotage by Eskom is upped by politicians. Whether that’s Mineral Resources and Energy Minister Gwede Mantashe describing how rotational power cuts are “agitating society against the state” and the ANC, or International Relations Minister Naledi Pandor likening the rolling blackouts to “oppositional attacks”.

It’s blame-shifting. It’s another twist in ideological navel-gazing; SOEs were meant to be the drivers against poverty and joblessness as part of the developmental state. And it’s a turn to victimhood to cover a possible election defeat in 2024, or to galvanise voters to ensure another governing ANC victory.

“I have personally said to Eskom, ‘Eskom, it will be an injury to our people if we implement this 18% now when we are going through load shedding. Put it in suspense for a while,” Ramaphosa told the Free State ANC elective conference earlier this month in reference to the 18.65% price hike approved by the statutory energy regulator, Nersa.

It was taken as a call to action “to ease the burden on society”, Eskom board chairperson Mpho Makwana told MPs on 24 January, pushing for a date when rolling blackouts would end.

Read more in Daily Maverick: “Global firm to validate Eskom stats as rolling blackouts remain reality for next 24 months, Scopa hears”

“We have committees to look at what can be done to cushion where we can. As soon as we have found the mechanism of easing the pain, we will go back to our shareholder [the public enterprise minister] and Necom [National Energy Crisis Committee]...”

Right now, this signals how political interference in Eskom stays put, without much pushback. It seems a case of the more things change, they stay the same. Lest we forget. DM

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South Africa

The unbundling plan

Kusile and Medupi

Jacob Zuma’s presidency

Talk of sabotage