Eskom should be split, experts to tell president – sources

Date: Jan 25, 2019

South Africa’s Eskom could be split into three separate firms under proposals from experts President Cyril Ramaphosa has hired to help revive the ailing state power company, two sources familiar with the matter told Reuters.

Reforming Eskom is vital to get Africa’s most industrialised economy firing on all cylinders. It supplies more than 90 percent of the nation’s power but is drowning in debt.

A Sustainability Task Team, picked by Ramaphosa, is due to report to the president next week, but shared its preliminary thoughts about Eskom with senior members of the ruling African National Congress (ANC) at a two-day meeting that ended on Monday.

One senior ANC source briefed by the task team said it proposed a “functional unbundling of Eskom,” which would involve separating it into three state-owned entities responsible for power generation, distribution and transmission.

A second source who met the task team recently confirmed it favoured splitting up Eskom – a strategy which analysts say should encourage greater efficiency and transparency.

Ramaphosa’s task team also told senior ANC members that Eskom, which has around 420 billion rand ($30 billion) of debt and is regularly cited as the biggest threat to the country’s public finances, needed another government bailout to survive, said the senior source, who asked not to be named.

“The ANC recognises that there is a need for a serious turnaround strategy for Eskom. But it feels very strongly that it should not lead to privatisation or massive job losses,” the senior source said.

Eskom’s debt pile was built up due to heavy staffing, stagnating power sales and rising coal costs that it has not been able to pass on to customers, analysts say. Cost overruns on building two major power plants have also hit its finances.

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