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COSATU Today | COSATU Press Statements
COSATU will fight attempts to privatise Eskom to the bitter end
6 August 2014
The Congress of South African Trade Unions is not surprised by media reports that there are moves within government to privatise Eskom. This is a continuation of an agenda started in the late 1990s when government scaled down investment in the electricity sector with the hope that the private sector would invest in the sector.
Eskom’s warning that energy security would be compromised by lack of investment in the sector fell on deaf ears of those who believed so blindly in market solutions for the country’s economic problems. Instead of heeding Eskom’s warning, government went on to commercialise Eskom in the early 2000s. The electricity utility had to depend more and more on the revenue generated from high electricity tariffs.
The lack of investment resulted in electricity demand exceeding supply in a massive way as the electricity crisis set in around 2008. While electricity tariffs increased an average of 5.7% between 1997 and 2007, they increased by a massive 23% on average between 2008 and 2013.
In 2008 the tariffs were increased by 27.5% while inflation rate was at 10.3%. In 2009 they were increased by 31.3% was inflation rate was at 6.16%. In 2010 they were increased by 24.8% while the inflation rate was at 5.4%.
The consequences of commercialisation were beginning to be felt as the electricity tariffs were increasing faster than the rate of inflation and wage settlement rates. Today, despite the interventions to boost the manufacturing sector of the South African economy, the sector is performing poorly and it is not creating decent jobs the country so desperately needs. One of the key binding constraints in this regard is the price of electricity.
The crisis further justified the privatisation of the electricity sector. There were more calls for the introduction of independent power producers (IPPs) to “supplement” Eskom’s capacity. But in no time there were complaints that Eskom was both a referee and a player at the same time and the way it is structured was hindering entrance of IPPs into the electricity market.
Government then introduced a Bill that would establish an Independent System and Market Operator (ISMO). This Bill has not been signed into law yet; but once done, the establishment of ISMO would see Eskom being stripped of its function to buy electricity from IPPs. The function of buying electricity would then vest with ISMO and it would decide whether to buy power from Eskom electricity generators or from IPPs.
There were even suggestions that the transmission assets should be taken away from Eskom to “fully level the playing field”. COSATU raised its objections and indicated that the establishment of ISMO would weaken Eskom’s balance sheet and strengthen the calls for its privatisation. The privatisation agenda was also evident during the announcement of the plans to construct Medupi and Kusile. The initial plan indicated that Kusile would be a privately owned electricity generator.
All this clearly indicates that the 1996 class project agenda has not been exorcised completely. This calls for maximum vigilance by progressive forces. COSATU fully agrees with the chairperson of the Parliament’s Portfolio Committee on Energy, comrade Fikile Majola that this agenda runs contra to the ANC agenda of building a developmental state.
It can’t fit into the agenda of the second phase of radical transformation and must be defeated. Electricity is critical for the transformation away from being an extractive economy to an economy where more value added goods are produced and thus more decent jobs are created. We will not hesitate to mobilise our members to defeat these remnants of the 1996 class project.
Patrick Craven (National Spokesperson)
Congress of South African Trade Unions
110 Jorissen Cnr Simmonds Streets
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