Electricity price hikes engineered by crooks
1 April 2021
From today, 1st of April 2021, electricity prices are going up by 15%, at a time the rate of inflation has fallen below the 3-6% target. A 15% increase is many times the inflation rate of the first quarter. This increase is nearly three times more than the projection made in 2018, of 5.2%, by National Energy Regulator of South Africa (NERSA). Over the past fourteen years, electricity has consistently risen way above the rate of inflation. In 2020, the price of electricity increased by 8.0%, in 2019 by 13.8% and in 2018 by 5.2%. Between 2007 and 2020, the price increased by 460% (before inflation); the ‘real’ after-inflation rate increase was 205%.
For that increase, there has been absolutely no improvement in service quality. Indeed the opposite is our experience, with load shedding and the new strategy of “load reduction” applied by Andre de Ruyter against poor and working-class communities and small municipalities whose financial capacity to pay these skyrocketing bills has been severely limited by Covid-19. Yet de Ruyter took the opportunity of the cold 2020 wintertime, when lockdown conditions prevailed, to impose these discriminatory cut-offs, hitting even those households and companies in affected areas which had been paying their bills.
The question is: why does Eskom increase electricity way above inflation rate? The answer lies in the extreme corruption and mega-project addi tion that have crippled the generation of energy, and immersed Eskom in R500 billion of debt, leading to international credit rating downgrades of the South African government, unprosecuted corruption that leads to the very top of the South African ruling party, and on top of all that, the worst load shedding in Eskom’s history.
Electricity prices have been hiked unreasonably by Eskom managers because, through their corruption, the company pays for coal-fired power plants that include bonsalas to the ruling African National Congress through its investment arm Chancellor House, as well as paying for coal at inflated rates. In this context, there is a persistent collusion of those in government and the parasitic capitalists looking to enrich themselves from the pockets of consumers.
These include Hitachi bribing the ANC through a ¼ ownership deal with Chancellor House as they received Eskom contracts to supply boilers to Medupi and Kusile, even though the chair Eskom at the time – Valli Moosa – was on the ANC Finance Committee, for which the Public Protector in 2008 slapped his wrist for the “improper” conflict of interest. Then after prosecution under the U.S. Foreign Corrupt Practices Act in 2015, Hitachi settled out of court with the Securities and Exchange Commission, paying a fine of nearly R300 million – none of which came to South African taxpayers or Eskom customers.
The National Prosecuting Authority staff have still not got around to following up on that, and the World Bank continues to push for repayment on its $3.75 billion loan for Medupi (arranged by then Finance Minister Pravin Gordhan), along with debt owed for Medupi to the African Development Bank, various European private and public sector banks, the China Development Bank and the BRICS Development Bank – even though community and environmental activists joined opposition parties and even Business Day newspaper in condemning Medupi financing as corrupt at its birth in 2010.
This is a clear case of Odious Debt: the R56 billion borrowed from the World Bank should be erased from the liabilities of Eskom, as any just society would do whereby a corrupt lender takes the ‘haircut’ for a dubious loan. A government serious about attacking corruption would default on that loan, and defend doing so in international courts now that the World Bank has lost its diplomatic immunity after losing a 2019 U.S. Supreme Court case that left it with liability for misguided financing.
SAFTU insist that there is a very strong link between these massive electricity price hikes, corruption and the drive to privatise energy supply.
Only this week SAFTU laid charges of corruption, fraud and money laundering against the leadership of Eskom, South32, Seriti, Pembani, and others. Under the guardianship of Energy Minister Gwede Mantashe and Public Enterprises Minister Pravin Gordhan, Eskom is entering into a 10-year deal with Seriti. That firm recently bought South32 operations so as to send profits to the world’s largest mining house – Australian-based BHP Billiton, from which South32 was spun off – through charging Eskom the inflated price of R478.40 per tonne. This extension of a contract over the period 2024 to 2034 will cost Eskom a staggering R67 billion, which will be passed on into the society and economy.
The overpricing of coal in this regard is not merely out of sync with market forces, but represents fraudulent over-billing which is aimed at assisting Seriti Holdings to purchase South 32’s South African Energy Coal (SAEC) assets. This means the consumer – including poor and working-class households at continual risk of disconnection – are now carrying the burden of helping Seriti purchase South 32’s assets.
It must also be noted that Thebe Investments (originated by ANC-controlled Batho Batho Trust) has long served as a de facto investment vehicle of the ruling party, and from 2018 took a major position in Seriti Holdings when it purchased Kriel, New Denmark and New Vaal coal mines from Anglo Coal for R2.3 billion In other words, these electricity price hikes are a malign way of deflecting the costs of purchase of South 32 assets to the consumer by the ruling party, just as in the case of Medupi corruption. Moreover the purchase of these coal mines also makes it more difficult for South Africa to kick our fossil fuel addiction, which we must do to preserve life on this planet for future generations.
The other aspect that adversely influences not only electricity prices, but also the taxpayer, is planned multi-billion rand rehabilitation costs of coal mines linked directly to Eskom electricity generation. However, on 1 April 2021, South 32 announced that it will provide $250 million across a decade for rehabilitation of SAEC operations to enable a smooth sale of its assets. SAFTU strongly believe that this attempt to begin rehabiliting its assets is due to the complications arising out of an objection by National Treasury, that may prevent the sale of South 32’s SAEC to Seriti. In addition, we are encouraged that watchdogging these deals has begun to create additional pressure, not only by SAFTU but other public interest groups.
On 31st March, SAFTU laid charges of fraud and corruption against the directors of companies, institutions and the functionaries within government who are allegedly responsible for the hiking of coal prices that directly leads to electricity price increases. We in SAFTU see this as a scheme to loot Eskom, the taxpayer and consumers of energy, all South African citizens.
All this takes place against the backdrop of unprecedented unemployment thanks to 1.5 million job lost last year, the threat of an imminent Covid-19 third wave, and ever more people unable to afford electricity.
The cost of nutritious food in a household, according to the latest Household Affordability Index, is estimated at R4039.56 which is way above the National Minimum Wage. For most of workers who earn the R3 800 minimum wage, the new electricity hikes compound the problem of poverty.
SAFTU encourage working class people, who suffer most from the electricity hikes, to organise resistance and fight for a transformed Eskom, and a move towards a genuine Just Transition with green energy production. Through a vision of renewable energy, working-class coordination and self-management, community-based empowerment, municipal cross-subsidisation and a transformed Eskom’s overall support at the scale of a national grid, SAFTU intend to rally all progressive organisations to resist the neoliberal onslaught and corruption, and to offer an affordable alternative that will bring South Africa’s massive untapped wind and solar power to ordinary people.
Issued by SAFTU, 1 April 2021
