South Africa could be heading for yet another dark period, with an Eskom strike drawing near, according to The South African.
Having just recently posted a record-breaking R20-billion loss in the last financial year, the struggle power utility is now facing labour disputes.
Between 180 and 200 senior managers are dragging the utility before the Commission for Conciliation, Mediation and Arbitration (CCMA) after not receiving salary increases and incentive bonus in the past year. The managers earn between R1.5 million and R3 million per annum.
Eskom recently granted middle managers a 4,7% increase, but they are dissatisfied and are looking for 7,5%.
Yet a recent report on eNCA states that 365 senior employees have had lifestyle audits conducted on them.
Eskom’s vast wage bill, its poor financial management and its uncontrollable debt mean that load-shedding is likely imminent. The utility is struggling to generate sufficient supply – something that will anger South Africans as rumours of a deal brokered with neighbouring Zimbabwe to supply 400MW of power per week.
This is a week that the beleaguered power utility would rather forget.
Yesterday the state-owned enterprise posted net losses after tax of R20.7-billion.
These losses were due to:
- Municipal debt rising to R20-billion
- NERSA only granting a 5.23% tariff increase
- Sales declining by 1.82%
- Wage settlements with unions that were above inflation
Soweto residents demand flat fee
The residents of Soweto, who combined owe Eskom more than R18-billion in unpaid fees, have demanded that prices for unlimited electricity be capped at R100 for each resident:
- Soweto residents demand that their debt be written off
- Of the estimated residents in Soweto, Eskom currently supplies 135 000 with legally connected power
- Only 12% (16 2200) of these customers pay for electricity
- Debt from the area has risen from R3.6 billion in 2014 to its current level of R18-billion
- Eskom is threatening to disconnect non-paying customers, remove illegal connections, and move more houses to prepaid electricity
- Soweto residents are fighting back, launching Operation Khanyisa which sees trained local members illegally reconnecting houses for no charge
Kusile in crisis
Construction on the coal-fire power station Kusile began 11 years ago, in 2008. However, not one unit is currently working:
- All six 800 MW generator units are offline
- Five years behind schedule, only Unit 1 at Kusile has been handed over for commercial service
- Units 2 and 3 are still undergoing testing and commissioning
- Major design, execution and operational problems are being experienced
Based on the factors mentioned above, a number of industry experts believe load-shedding will reappear towards the end of August:
- Major issues with Eskom’s new power plants haven’t been resolved
- Debt is mounting
- Generation remains a massive challenge for Eskom, and capacity is limited
- Operational issues have not been addressed
By Jenni Evans for News24
Johannesburg mayor Herman Mashaba is seeking an urgent meeting with the Eskom board over the power utility’s declaration that it will no longer do repairs in places illegally connected to the power grid.
This follows a meeting between Mashaba and Eskom officials on Monday to deal with complaints by Soweto residents about illegal electricity connections, vandalised infrastructure and extended blackouts.
“Due to the complex nature of the issues discussed between myself and the Eskom team, during a meeting at Megawatt Park, it was decided that it would be prudent to include the Eskom board in our deliberations,” said Mashaba in a statement.
“I have therefore requested an urgent meeting with the board of Eskom and its shareholder within the next 24 hours. The team at Eskom has indeed committed to ensuring this does take place.”
Mashaba felt it was important for the city and Eskom to work together to find solutions to issues faced by Sowetans and other residents affected by ongoing blackouts arising from Eksom’s credit management processes.
Last week Eskom threatened that it will not repair infrastructure in areas where there are illegal connections or the safety of staff cannot be guaranteed.
“Eskom will only restore supply to legal and paying customers in the areas, on condition that the community allows safe access to Eskom staff to conduct audits and remove illegal connections,” the statement said.
It was previously reported that Soweto has been ranked as one of the top defaulters in the country, where residents owe Eskom more than R17bn.
Mashaba said last week after Eskom’s warning that he felt compelled to intervene on behalf of residents who will be affected by the actions of a few.
South African consumers will experience their first price drop at the pumps in six months as the price of fuel decreases by nearly a rand today.
Petrol 95 will fall by 95 cents a litre and 93 octane by 96 cents, while diesel (0.05% sulphur) will decrease by 74 cents and diesel (0.005% sulphur) by 75 c/l.
However, analysts are pointing out that consumers will have little to celebrate as electricity tariffs hikes kicked in on 1 July.
Despite the fact that the average car will cos R30 to R40 less to fill, consumers are unlikely to achieve much relief.
- Bus and taxi fares are unlikely to go down
- Electricity tariffs are increasing
- The petrol price decrease only accounts for about R2.50 for every R1 000 people have
In February, the Soweto debt was sitting at R17-billion in unpaid electricity bills.
Eskom spokesperson, Dikatso Mothae said the power utility “continues with initiatives to improve revenue recovery from residential customers”.
These include removing illegal connections, conducting meter audits, repairing faulty or tampered meters and limiting ghost vending of prepaid electricity, installing smart and/or prepaid meters within protective enclosures to prevent tampering, converting customers from post-paid to prepaid and stepping up disconnection of customers not honouring their current accounts
In his State of the Nation Address last week, President Cyril Ramaphosa announced that the ailing Eskom will continue to received further bailouts.
He said the government has a strategy to deal with Eskom defaulting on its loans.
“We will, therefore, table a Special Appropriation Bill on an urgent basis to allocate a significant portion of the R230-billion fiscal support that Eskom will require over the next 10 years in the early years,” Ramaphosa said.
The president also said that Eskom is working hard to recover money owed by municipalities and customers.
Additionally, he said that “the days of boycotting electricity payments are over”.
Meanwhile, according to Mothae, municipal debt is sitting at R20-billion as at the end of March 2019.
“We continue to have discussions with Municipalities, Provincial Government and National Government and the Inter-Ministerial Task Team to find a resolution. We are continuously reviewing Payment Arrangements with municipalities, issuing default letters and then as a last resort we start a PAJA [Promotion of Administrative Justice Act] process when they default which leads to planned power interruptions,” she said.
“However, we normally get interdicted by customers or customer groupings preventing us from interrupting electricity supply and Municipalities typically take payment holiday during these interdicts. Eskom has now started to issue summons to municipalities for the amount in the Acknowledgement of Debt,” Mothae added.
Earlier this year, the Orlando Action Committee said it was willing to negotiate with the President Cyril Ramaphosa on electricity payment.
The Sunday World reported that Gauteng townships have become “a nightmare” for Eskom employees, who are often “intimidated and assaulted when working in these areas”.
By Michael Cohen and Paul Vecchiatto for Bloomberg
It isn’t difficult to find the main culprit behind South Africa’s biggest economic contraction in a decade: Eskom Holdings SOC Ltd., the state-monopoly power provider.
Gross domestic product slumped an annualized 3.2% in the first quarter, after expanding 1.4% in the prior three months, as a series of power cuts — courtesy of Eskom — hammered manufacturing, mining and agricultural output. The utility provides about 95% of the electricity used in Africa’s most industrialized economy.
”Eskom has a grip on the South African economy that is unlikely to be seen anywhere else in the world,” Kevin Lings, chief economist at Stanlib Asset Management Ltd. in Johannesburg, said by phone. “Eskom powers all tiers of the economy right down to the households, and so when it cannot supply electricity all sectors suffer. It is unlikely to change because there is currently no well-articulated plan to cure its problems.”
Eskom, which is buckling under the weight of more than $30 billion in debt, staged days of rolling blackouts, mostly in March, to prevent a collapse of the national grid as its fleet of poorly maintained power plants struggled to keep pace with demand. The outlook looks more promising for the second quarter: The power cuts have abated and the authorities have given assurances that there will be sufficient supply for the winter.
Even so, the economy’s shock performance, which far exceeded the 1.6% median contraction forecast of 16 economists, illustrates the urgency of the need for the government to diversify the power supply. The International Monetary Fund Monday said Eskom was a “major downside risk” to South African economic growth.
A program to purchase green energy from independent producers is in limbo. And little visible progress has been made in implementing President Cyril Ramaphosa’s plan to split Eskom into generation, distribution and transmission units. The proposal, designed to make it easier for other producers to supply the grid, is opposed by labor unions.
The bleak prospects of a speedy resolution to South Africa’s energy crisis are reflected in GDP forecasts for the rest of the year: The central bank anticipates an expansion of just 1% in 2019, the government 1.5% and Bloomberg Economics less than 1%. That’s well below the 3% Ramaphosa was targeting before he took power in February last year, and is a huge obstacle in way of his drive to attract $100 billion in new investment and tackle a 27.6% unemployment rate.
By Crecey Kuyedzwa for Fin24
Zimbabwe has started to institute planned rotational power cuts to reduce stress on its national grid, following low water levels at Kariba Dam, generation constraints at Hwange Power Station and limited imports from Eskom in South Africa and Mozambique.
Power utility Zimbabwe Electricity Transmission & Distribution Company on Sunday published load shedding schedules for the whole of the country.
“The power shortfall is being managed through load shedding in order to balance the power supply available and the demand,” it said in a weekend statement.
While Eskom in South Africa has eight stages of load shedding, Zimbabwe has announced only two stages for now.
The power supplier divided the country into seven regions, and then further into districts or suburbs. It has given each district or suburb a numerical code.
This code is then checked against a regional table which has two time periods: Morning peak – between 05:00 and 10:00, and evening peak, between 17:00 and 22:00.
When power is cut, suburbs that fall within the time period lose power.
The same suburbs or districts will not generally have power cuts over the same day’s morning and evening peaks. When load shedding moves to Stage 2 and “increases beyond the planned limit” power to additional suburbs will be cut. The power cuts will be in five or eight hour blocks in different areas of the region or district.
Zimbabwe has had to implement power cuts, in part, due to poor rainfall in 2018 and 2019 that led to reduced inflows into Kariba Dam. The dam’s hydroelectric power stations supply electricity to both Zimbabwe and Zambia
Over the years Zimbabwe has been topping up its power supply by importing an average 100MW of power from Eskom and Mozambique, but will be forced to look for more given the current crisis.
Power imports from South Africa’s Eskom also cannot be guaranteed, with the power utility facing a fair share of its own challenges.
Analysts say the impact of the power cuts will be significant to industry, which cannot easily turn to the use of generators amid limited availability of fuel.
By Tom Head for The South African
South Africa could be set for another round of drama from Eskom, as the ailing power utility has reportedly failed to receive R7 billion in loan payments initially set to come from the Chinese Development Bank (CDB).
That’s according to City Press, who have reported that the creditors do not trust their promises over proposed maintenance work. It would be the second time in just over two weeks that one of Eskom’s promised loans failed to materialise after the Brics New Development Bank also did not part with their billions.
Why haven’t Eskom received the loan?
On Easter Friday, Finance Minister Tito Mboweni was forced to grant the power giants an emergency bailout in order to meet salary demands and diesel costs. It’s reported that the CDB has taken note of their actions, and fear that this particular instalment of their cash will be used to plug holes, rather than go towards maintenance.
The loan in question will come to R33 billion in total, and it has been earmarked for the development of the Medupi and Kusile power plants. The new builds are yet to get up to full speed, and they’re struggling to produce the amount of electricity needed to keep South Africa illuminated as more “old units” come to the end of their lifespans.
Load shedding fears resurface
Eskom is very much living hand-to-mouth at the moment. In fact, some of their biggest critics believe this will be the last week where the lights stay on: Natasha Mazzone of the DA has accused the firm of diverting funds from long-term projects in order to keep voters happy before the general election this Wednesday.
Public Enterprises Minister Pravin Gordhan has also refused to rule out the return of load shedding this winter, despite unveiling plans to nip it in the bud at the beginning of April. We’ve already seen how one defaulted payment can spark a financial crisis, so a second one within two weeks is a terrible omen for the company… and its consumers.
By Rene Vollgraaff and Londell Phumi Ramalepe for Bloomberg/Fin24
South Africa’s power cuts could bring economic growth for the year close to zero if they continue at the same severity seen in March, the central bank said.
The wave of rolling blackouts that started in November and are among the worst the country has yet experienced could knock 1.1 percentage point off economic growth, the Reserve Bank said in its Monetary Policy Review released Wednesday in Pretoria, the capital.
Expansion of close to zero would be the worst outcome since 2009, when former President Jacob Zuma came to power.
The nation’s embattled power utility, Eskom, implemented so-called stage 4 load-shedding, which removed about 10% from the grid, last month as ageing plants were offline. The company is battling with high debt levels and declining revenue after years of financial mismanagement. It was at the center of alleged looting under the previous administration that’s referred to locally as state capture.
“It has become clearer, however, that the legacy of state capture of which load shedding is one symptom will constrain growth for a longer period,” the Reserve Bank said. “The damage done by state capture is worse than previously understood.”
The country’s economy went through a recession last year and hasn’t expanded at more than 2% annually since 2013. Growth will only pick up once domestic constraints are dealt with, Deputy Governor Kuben Naidoo said in a presentation after the release of the Monetary Policy Review. Gross domestic product increased 0.8% in 2018.
The central bank pointed out that its estimates, which also show 125 000 jobs could be lost, assume load shedding will persist at high levels throughout the year, and don’t incorporate longer-term costs such as forfeited investment.
“It’s unclear to what extent firms and household have now made their own plans to manage or avoid their reliance on Eskom, which could mitigate growth costs,” the Reserve Bank said.
BankservAfrica’s monthly Economic Transaction Index (Beti), a broad indicator of the country’s economic health, showed that transactions declined by 0.4% from February to March.
“The March Beti declined across all measurement periods,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, in a statement. Naidoo said the numbers are a clear indication of the “deteriorating state of the economy”.
According to a recent article in MoneyWeb, Eskom’s load shedding in March hit the economy hard. Individual transactions increased in value but decreased in number during this period.
The standardised nominal value of the Beti was R875.7-billion while the average value per transaction was R8 444. This is the first nominal rise in 23 months, said Naidoo. This rise, however, is due to VAT refunds paid in March.
“Without the nearly R20-billion worth of VAT repayments paid into the National Payments System, the March Beti would have been worse off.”