South Africa unveils rescue plan for ailing power company

A woman carries firewood on her head as she walks below Eskom’s electricity pylons in Soweto, South Africa. (Reuters/File)
Updated 29 October 2019

South Africa unveils rescue plan for ailing power company

  • “The restructuring of Eskom has the benefits of increasing transparency, particularly in respect of costs”

JOHANNESBURG: South Africa on Tuesday unveiled plans to fix its embattled state power utility Eskom, which has sporadically suffered rolling blackouts that plunged businesses, schools and homes into darkness.

Public Enterprises Minister Pravin Gordhan detailed a long-awaited roadmap that will see Eskom divided into three subsidiaries: Generation, transmission and distribution.

Gordhan said that the transmission unit — which conducts electricity and manages 45,000 km of power lines — would be the first to become a stand-alone entity, still owned by Eskom.

That process is expected to be completed by March 2020.

“The restructuring of Eskom has the benefits of increasing transparency, particularly in respect of costs,” Gordhan said.

Eskom, which generates around 95 percent of South Africa’s electricity, has accumulated $30 billion of debt despite receiving multiple government bailouts.

Credit ratings agencies have warned that Eskom’s debt could cause downgrades and embarrass President Cyril Ramaphosa, who was re-elected this year in part on a pledge to restore the economy.

Eskom has long struggled to produce enough power due to aging and poorly maintained coal-fired power stations combined with decades of mismanagement and alleged corruption.

South Africa was hit by a week of rolling blackouts earlier this month — a tactic known as ‘load-shedding’ — aimed at rationing electricity when demand is too strong.

Gordhan gave no details on Eskom’s financial restructuring, saying only that Finance Minister Tito Mboweni was likely to comment on its debt when he presents a mid-term budget on Wednesday.

Energy supplies had to stay ahead of business activity, Gordhan said, “so that we are not acting as a constraint on economic growth.”

South Africa’s government plans to pour 128 billion rand (around $8.8 billion) into Eskom over the next three years.

State-owned companies were at the center of corruption scandals known as “state capture,” under South Africa’s former President Jacob Zuma.

Gordhan said that continues to affect the utility in a “systematic” way as many highly-skilled professionals were squeezed out of Eskom.

A new CEO is also be announced in coming weeks to replace Phakamani Hadebe, who resigned in July citing “unimaginable demands” of the job.

The new business plan should also expose Eskom to more competition and orient it toward renewable sources of energy.

The utility will be expected to cut coal and diesel costs and negotiate lower prices from renewable energy suppliers.

Power stations are to be grouped into clusters and compete among each other to give consumers cheaper electricity.

Trump calls for World Bank to stop lending to China

Updated 07 December 2019

Trump calls for World Bank to stop lending to China

WASHINGTON: US President Donald Trump on Friday called for the World Bank to stop giving loans to China, one day after the institution adopted a lending plan to Beijing over Washington’s objections.
The World Bank on Thursday adopted a plan to aid China with $1 billion to $1.5 billion in low-interest loans annually through June 2025. The plan calls for lending to “gradually decline” from the previous five-year average of $1.8 billion.
“Why is the World Bank loaning money to China? Can this be possible? China has plenty of money, and if they don’t, they create it. STOP!” Trump wrote in a post on Twitter.
Spokespeople for the White House and the World Bank did not immediately respond to requests for comment.
The World Bank loaned China $1.3 billion in the fiscal 2019 year, which ended on June 30, a decrease from around $2.4 billion in fiscal 2017.
But the fall in the World Bank’s loans to China is not swift enough for the Trump administration, which has argued that Beijing is too wealthy for international aid.