Many years ago Port Elizabeth had two power generating plants – one at the corner of Mount and Harrower Roads and one out at Swartkops. The Swartkops one is still visible today. (CLICK HERE to skip my maudlin ramblings and fast forward to our proposed solutions)
The then government of the day was under the iron fist of the Nationalist Party who, just like the government of today, had an obsession with centralised control and racial profiling. Along with that I am sure that they had an active policy in place to support their supporters. As anyone will tell you; “People do strange things in the pursuit of wealth” – I have an acquaintance who will literally sell his grandmother if he could make money out of it. Anyone want to buy an urn filled with ashes?
Eskom, a government owned business from day one, needed clients to survive so I am sure that the then government of the day was not adverse to dipping into public funds to bankroll their centralised electricity generation and sales.
Think about it like a politician and not a business man: Government passes legislation to bring about the birth of a centralised entity such as Eskom, Eskom needs money so government just takes it from the taxpayer citing national importance and pride and all those emotive words that mean nothing when you are struggling to put bread on the table or just have a bowel movement in a dignified manner. Think SAA whilst we talk about Eskom and you will get more of the picture.
In order to increase turnover, government then made it very hard for local electricity generation (like the two we had in PE) to survive by providing cheaper electricity. Why cheaper? Not as a result of efficiency but as a result of being able to dip into the pockets of taxpayers.
One wonders how much money was siphoned off into the pockets of national and local politicians in order to bring about this ‘total onslaught’.
Fast forward a number of years into the new democracy and we now have a situation where government can reward their supporters with high paying jobs in a state owned enterprise.
What has changed?
- The municipalities now realise that they have been ripped off as it would have been better for them to retain some power generation capabilities – to smooth the ‘balance of power’ so to speak.
- Government and cronies have a party with their newfound wealth and ignore voices of reason.
- The funding requirements for Eskom become greater so as to catch up with maintenance and power generation backlogs.
- The supply of electricity becomes a grass roots emotive issue.
- Government ‘stands back’ and tells Eskom to stand on it’s own two feet – no more handouts.
- Eskom now attempts to hold the government and it’s people to ransom by demanding a multi year 16% increase to fund new generation capacity.
How long do you think I would stay in business if I had to tell my clients that I was going to increase my charges by 16% per annum for 7 years in order to fund my purchase of a server farm or a new car?
What Eskom have failed to realise is that municipalities across South Africa sell the electricity on to their ratepayers at markups ranging from 100 to 300% And, on top of that municipalities have a mind boggling array of add on electricity products at markups of up to 600%. Most observers are adamant that the gross profit made by municipalities on the sale of electricity is not used as legislated in the upkeep, maintenance and extension of reticulation but rather to prop up failures in other areas. A poor state of affairs.
Consider this – Eskom charges municipalities between 55 and 71 cents per kilowatt hour for electricity. Local lobby groups say the amount in Port Elizabeth is 55 cents per kilowatt hour.
Now a 16% increase on 55 cents is only 0.088 cents.
BUT, the Nelson Mandela Bay Municipality has charges ranging from a low of 65.6769 c/kWh to a high of 379.9980 c/kWh. So that would equate to an increase of between 10.50 cents and 60.79 cents per kilowatt hour. When you are a business with a supply exceeding 6 600 volts and paying R50 Million rand per annum to the municipality then that bill increases dramatically even if an 11% increase is applied.
There is one electricty user in Port Elizabeth whose electricity bill has increased from R14 million in 2007 to R50 million last year – it will take five 16% increases to take their electricity bill to R105 million a year.
How can municipalities and state owned enterprises get away with annual increases far above the CPI, PPI and average salary increases year after year?
- Cap the annual allowed increase by municipalities to 0% for the next 5 years.
- Use the VAT (an estimated R17.8 billion per annum) paid by Eskom to finance Medupi and Kusile (the estimated cost of Medupi, excluding interest during construction, is R98.9 billion and of Kusile is R121bn, excluding Industrial Development Corporation funding, as at September 2009 rand value).
- Allow Eskom and large users to deal direct.
- Stop all advertising, sponsorships and the like by Eskom – they are a monopoly, it is not like we have a choice.
- According to Eskom, electricity is an ‘essential’ akin to breathing so why doesn’t the government ZERO RATE electricity and water for domestic account holders – they could start by zero rating the Assistance to the Poor charges and cap the zero rated portion on an annual basis. Once Medupi and Kusile are paid for then the zero rating could come into effect for the rest of us. As it is Pravin and his buddies are collecting massive amounts of VAT from Eskom AND the municipalities – enough to pay for Medupi and Kusile within a couple of years I am sure!