What Is the meaning of the beheading of Eskom?
The suspension of the CEO and three other key executives of Eskom on 12 March is difficult to understand - or so Business Day argued, pointing out that all the issues mentioned by the responsible Minister, Lynne Brown (instability at power plants, financial liquidity, the lack of credible information from Eskom, the insecurity of supply, the pricing of coal and diesel and the delays in the building programme for new power stations) have actually been around for many months. Moreover, the idea that what is needed is another major fact-finding probe is peculiar - a number of inquiries have already been held.
All of which is true. It would be truer to say that Eskom's management is in a chaotic state for the same reasons that SAA, the SABC, Denel, the railways and various other state-owned enterprises are, that the ANC has simply no idea how to run such enterprises, has used them as experimental test-beds for the most extreme forms of affirmative action, has continually interfered with them politically, has parachuted into office key political clients who have no expertise in the organization's key functions and, of course, the organizations themselves have been repeatedly plundered by the new political elite put in charge of them. They also pay absurdly high salaries to their numerous top executives, allow huge wastage of money on such things as sport sponsorship and hidden subsidies to New Age and typically provide a theatre for internecine wars between their directors and executives.
This has, however, been the case for almost twenty years now and ANC governments have never seemed to be much bothered. In general the government has cast a benevolent blind eye over looting by the new elite because that is assumed to be par for the course and one of the principal things that the ANC government is in power to promote. In the past this was even true about Eskom. So why the panic now?
Obviously, the fact that Eskom is more and more responsible for damaging the rest of the economy creates its own urgency, particularly since the ANC is keenly aware that load-shedding is costing it votes which it cannot afford to lose as the 2016 municipal elections loom closer. Quite clearly, Eskom could cost the ANC control of Port Elizabeth, Pretoria and Johannesburg. Nothing that happens at SAA or the SABC can do that. Already Pravin Gordhan is busy gerrymandering municipal boundaries and the IEC is being "fixed" to help head off this dread prospect.
But there is something much more basic. As Deep Throat advised during Watergate, "follow the money". Already Eskom bonds enjoy junk status and bond yields are rising towards 7%. However, Eskom is now in such a ropey state that if the market thought that Eskom itself was going to pay off those bonds, the yield might be 17% or 27% because everyone can see that Eskom is chronically short of cash and in no position to repay. The yield is still under 7% simply because everyone now assumes that the whole of Eskom's massive debt has been shifted across onto the government's shoulders. This has a horrible effect on the government's indebtedness - if you add in (as you surely must) the debts of the other SOEs the national debt jumps from 47% of GDP to 58%. And rising.