A BEE, a Brian and hopefully a backup plan for Eskom

Cape Town – The proponents of Eskom's black economic empowerment (BEE) procurement policies are among the state-owned power monopoly's biggest thieves, energy analyst Ted Blom told the Cape Town Press Club on Friday afternoon.

He said that one of the biggest beneficiaries of the 51% black ownership requirement – above and beyond the mining charter requirement of 26% – was Deputy President Cyril Ramaphosa's company, Shanduka. The infamous and politically connected Gupta family have now also emerged as beneficiaries.

Blom said with Eskom's problems growing by the day, he expected that new acting chief executive officer Brian Molefe would either be "switching off the lights of Eskom" or it would be switching off Molefe's lights before the end of the year.

The BEE suppliers to Eskom "are earning more than double the profits" that the other suppliers are earning "with zero value added", he said, noting that the Minister of Public Enterprises Lynne Brown had not divulged the quantum or the price of the BEE coal supplies to Eskom.

BEE preferential treatment

Currently long-term contractors supply Eskom with coal – which supplied their coal-fired power plants – at R200 a tonne and BEE compliant suppliers are believed to be at R460 or so a tonne "plus R200 a tonne transport costs". Blom said it was not known what price Shanduka was getting, but he assumed as a BEE compliant company "it shares in this preferential treatment".

It was his estimate "and you don't have to be a genius" to work out the figures "but I suspect that two million tonnes of coal a year" was being supplied by Shanduka. This was worth about R56m a month "extra… that is on top of what the other suppliers are scoring… is it a conflict of interest (for Ramaphosa)?… it probably is."

Shanduka's interests in Glencore – controlled by Ivan Glasenburg – are managed by Glencore, the same company that was selling export-grade coal to Eskom at a massive premium, Blom pointed out.

Now the Gupta family's coal mine situated next to Mpumalanga's world environmental site is the latest BEE beneficiary. This "as far as I am aware" is not properly permitted and licensed, said Blom.

Executives placed under political pressure

It appeared that Eskom executives had been placed under political pressure to give the Gupta family the contract to supply coal from their Brakfontein mine.

The Sunday Times reported that ousted Eskom boss Zola Tsotsi bent the power utility's rules to push through a R400m a year coal supply contract to the Guptas – who jumped into the national spotlight when they illegally used the Waterkloof Air Force Base to fly in their family for a lavish wedding.

Turning to the appointment of current Transnet group chief executive Molefe as acting Eskom CEO, Blom said: "I must tell you how amazed I have been at the superfast run of events since the surprise parachuting in of Mr Molefe a week ago."

"Not only has he claimed to have nearly turned Eskom around financially in a week, he rubbished opinions of bankers and analysts that Eskom was in a financially precarious position and desperately needed bailouts and hefty price increases."

A week of Molefe spin

"I trust you will hold him to that and demand that Eskom withdraw its misguided 25% price increase application, as well as any other claims during the current MYPD period to 2018."

Blom said the demand and supply gap of the state monopoly was near double the figures produced by Molefe to MPs in Cape Town this week – 6 000 MW rather than 3 000 MW.

"He (Molefe) has informed us that he could abolish load-shedding before the end of the year as he only needs to find a spare 3 000 MW in the current Eskom system," Blom noted.

"My observation is … at this rate he should have Eskom wrapped up well within a month and should perhaps be seconded to the National Treasury where similar magic would be most welcome and he should thereafter be rewarded with a 'non removable statue'."

Eskom has priced out the private sector

Blom said Eskom has priced out the private sector from investing in generation capacity, such as a coal-fired power station.

Probably the only way to solve the energy crisis is to turn to solar power and importing power producing barges – which are already being used by other African states – to supply electricity.

He said solar is already being produced about 40 cents per kilowatt-hour cheaper than electricity. "Solar has become very dear to my heart.. the cost of solar has dropped to about 80c/kWh."

The Eskom price to consumers is about R1.20/kWh and would have to rise substantially if costs of empowerment, overpriced power plants and the build programme were to be absorbed.

Fin24