Slamming the brakes on the Kusile and Medupi projects in Mpumalanga and Lephalale in Limpopo respectively could go a long way in cutting much-needed costs at the power utility, according to recent Meridian Economics Report on Eskom.
The report revealed that avoiding the completion of Kusile units 5 and 6 could give rise to a financial saving in the region of R15 – 17 billion without affecting security of electricity supply.
“Abandon a large part of the Kusile, possibly part of the Medupi project, or allow Eskom and probably the state to default on its financial obligations and pay an enormous economic and social price.”
These recommendations come after Eskom presented to its major shareholder, Government, that it is expected to run at a loss of R3.5 billion by the end of March next year.
Worse, Eskom only has R1.2 billion left in its cash reserves until the end of November 2017, when it should have R20 billion.
Democratic Alliance Shadow Minister of Public Enterprise Natasha Mazzone said in a statement on Sunday Eskom has unsurprisingly rejected these proposals citing possible exposure to contractual penalties.
“Eskom’s excuses are frankly weak and nonsensical given the fact that it cannot afford these projects.” said Mazzone.
Mazzone said electricity giant’s application for a 20% tariff hike from National Energy Regulator of South Africa (NERSA) was simply unsustainable.
Yet another tariff hike will not sort out the financial woes at Eskom. It will just burden ordinary South Africans even more.
Mazzone said DA has submitted a request to the Chairperson of the Portfolio Committee on Public Enterprises, Lungi Mnganga-Gcabashe, for an urgent committee meeting with the Eskom Chairperson, CEO, CFO, COO and the Minister of Public Enterprises, Lynne Brown, to explain the current financial mess and present a credible plan on a turnaround strategy for the power utility.
Mazzone said currently Eskom was being treated like a leper by investors given the lack of credible governance, deeply entrenched corruption and gross financial mismanagement.
“Potential financers are understandably hesitant to back Eskom,” said Mazzone.
Minister Brown is expected to announce a new Eskom board soon, and with recent testimonies at the Eskom Inquiry implicating the Minister in State Capture, it will do little to quell the unease of investors and South Africa.
“South Africans deserve a power utility that has credible leadership. We need a South African-orientated Eskom, not a Gupta-orientated Eskom, to turn things around,” added Mazzone.