NUMSA’s concrete response to Eskom crisis
12 January 2020
The National Union of Metalworkers of South Africa (NUMSA) continues to be extremely disturbed by the failure of government and the Eskom board to fix Eskom. Since January of 2018, NUMSA has consistently advanced concrete alternatives and solutions on how Eskom’s challenges can be attended to and how we can realize a turnaround plan for such a strategic institution for the South African economy and the electrification of our communities.
NUMSA is more convinced that the refusal of both the then Minister of Energy, Jeff Radebe, and the current Minister of Public Enterprises, Pravin Gordhan as well as the current board of Eskom, to take forward the alternative which labour has consistently advanced, is tantamount to sabotaging not only Eskom but the South African economy.
NUMSA wants to be on record that enough is enough. We reject the poor and incompetent leadership which Pravin Gordhan has provided over Eskom and the rest of the SOE’s which has delivered costly loadshedding to Eskom but to the rest of the economy. There is no doubt that this reckless leadership has led to job losses in the manufacturing sector and mining sectors.
Worst of all, this reckless and clumsy leadership is directly responsible for the economy being rated as being on the verge of junk status by rating agencies. Recently, as a result of the failure to sort out the energy crisis, the World Bank has revised South Africa’s economic growth forecast to below 1% due to electricity supply concerns.
It is against this background that whilst NUMSA welcomes the resignation and departure of the economically-conflicted Jabu Mabuza, we do not buy his cheap tactic of simply taking the fall for misleading the President. Our honest view is that the entire incompetent Eskom board must go including the COO, Jan Oberholser who has added absolutely no value except adding to the wage bill. In fact, NUMSA is calling on the ANC National Leadership to take decisive action and deploy a new competent Minister of Public Enterprises as, unfortunately, Minister Pravin Gordhan has not just moved from one SOE crisis to another but with due respect he honestly appears to be overwhelmed and is unable to provide the necessary required leadership to fix our SOEs, in particular Eskom.
The following accounts for the disastrous nature and the arrogance demonstrated by both Minister Gordhan and the current board where they refused and rejected the concrete proposals from both NUMSA and NUM. Of course this attitude can be traced back to Jeff Radebe who signed 27 IPPs which will cost Eskom R300 billion over a 20-year period. These was done against the advice of the unions who stated these IPPs were costly and that they would destroy the Eskom market and worsen the continuing decline of Eskom sales.
It is the Eskom Board, Management and the Ministers starting with Minister Jeff Radebe and Pravin are responsible for the mess that Eskom finds itself in as they refuse to deal with straight forward solutions that NUMSA has advanced.
These solutions are as follows:
The disastrous nature of IPPs to Eskom
NUMSA called and advised the Eskom board, then Minister of Energy Jeff Radebe and Minister Pravin Gordhan that it was reckless, fraudulent and against the interest of Eskom to sign on the 27 IPPs onto the grid. The whole history of the IPPs has demonstrated that their business model was in direct conflict with the interests of Eskom as they were extremely expensive and would worsen declining Eskom sales.
The numbers on this front don’t lie: they are shocking and in fact they render the current board which supervised such a sham of a deal of the IPPs, as delinquent board members.
The IPPs that were connected in 2016, when we had enough capacity to generate a unit of electricity for 42 cents per kilowatt hour and Eskom sold at a loss of no less than R9 billion in that year.
During the 2018 Financial Year (FY) Eskom expenditure on IPPs was R21.3 billion (purchasing 9584 GWh from IPPs) which results in an average of
R2.22 per kilowatt hour as the result “must buy first” principle from the IPPs, forcing Eskom to sell at a loss of R1.38 per kilowatt hour, which translates to a loss of R13 billion. It is important to state that IPP shareholders invested in IPPs at the back of government guarantees and the Power Purchase Agreements which is based on an unfair principle known as the “must buy first principle”. This means that if energy generated by IPPs reaches the grid, it must be sold first and IPP’s are guaranteed payment from Eskom whether or not there is a demand. But the same cannot be said about Eskom because when Eskom distributes electricity, it has no guarantee that it will be paid as municipalities are not paying as a result of poor budget allocations by the National Treasury. This is especially in light of many people being unemployed and unable to pay rates.
As things stand, with coal you can produce electricity at a rate of 55c per kilowatt hour but with REIPPs you will produce that same electricity at a whopping R2.35 per kwh. It must also be noted that nuclear and coal are reliable sources of energy but you can’t say the same for renewables which are erratic in their availability.
Despite the country’s rush on all fronts to move from fossil fuels to renewable energy without consideration of our concrete challenges, and without a clear plan for a Just Transition, it is important to remind everybody about two important principles that applied to developing countries and to South Africa when we participated in COP15 that:
There was no obligation on South Africa to accomplish this, as the achievement of this would be subject to financial assistance from developed countries.
This was further echoed by the Paris Accord, Article 4, point 4 and 5 that to meet the targets, the developing countries were encouraged to move over time in light of their national circumstances.
Furthermore, the implementation of the Paris Accord was again conditional in that developed countries would have to support developing counties.
NUMSA is on record that as a union we are not against the movement from fossil fuels to renewables but we remain firm that when renewables are introduced, they must be at a pace and cost that the country can afford. We further demand that there must be a Just Transition and a socially-owned renewable sector which is why we are calling on government that the 70% of the current IRP additional capacity must be owned and controlled by Eskom.
The early warnings of such a reckless decision were clearly evident and glaring, right back in 2015, when out of the revenue generated on tariff increases awarded by NERSA, of the R8.2 billion in revenue, R6.5 billion went to the IPPs. Such a decision worked against the interests of Eskom and as such, Eskom’s equity was eroded and its profits were depleted.
The Cost of primary coal
NUMSA has consistently called on both Minister Pravin Gordhan and the current board that they must move swiftly in addressing the continuing escalating cost of primary coal. Our position is very simple in that all Eskom cost+ mines were owned and controlled by Eskom before they were handed over to the following companies: Glencore, South32, Anglo, Exxaro, Liketh and others.
It is these companies that have been driving high electricity tariffs because they charge exorbitant coal prices to Eskom. The current Minister and the current board failed to move decisively to address this cost driver which has made electricity completely unaffordable and in fact, the Minister chose to treat this group of White Monopoly Capital with kids’ gloves. Instead of moving decisively to renegotiate those contracts to prices that will make electricity affordable and nationalize coal as our country’s strategic mineral.
Cost overruns of Medupi and Kusile
NUMSA has been very firm that the cost overrun of Medupi and Kusile, driven by corrupt tenders must be investigated and that there should be no holy cows.
NUMSA demands that the ANC government led by President Cyril Ramaphosa, in consultation with unions, appoint an independent Forensic team to conduct a due diligence investigation on all daily plant failures to establish who have been the beneficiaries of these cost overruns.
Primary contractors at Medupi and Kusile who failed to implement the designs should be pursued to pay compensation and damages for the failure of technical plants.
Maintenance and under-investment of coal generating plants
The current so-called ‘new’ leadership at Eskom led by Pravin Gordhan forgets too quickly that they were in the Zuma government when the country was hit by loadshedding. In fact, President Cyril Ramaphosa, as the deputy President, led the Eskom war room team to deal with loadshedding. The first thing that this new board and the current leadership did was to harass and dismiss capable engineers and the capable leadership of Eskom led mainly by engineers who worked hard to ensure that we did not experience power cuts.
For instance, one of our best engineers who used to run Kendal Power Station and many Eskom managers who ran power stations were suspended on fictitious and trumped up charges which NUMSA challenged, fought and won them back. Christopher Nani remains suspended for almost 3 years now with full pay.
This point is being made in that in the tenure of this leadership, we witnessed a conduct and leadership style which reversed the achievements that were secured such as the reduction of the cost of primary coal, maintenance of plants and that load shedding was something of the past. The Eskom board and Eskom management, under the supervision of Minister Pravin Gordhan, brought back the expensive and destructive loadshedding to the economy.
As early as 2014 the issue of plant maintenance had already been tabled and is nothing new. The Generation Sustainability Strategy document indicated that Eskom had reduced planned maintenance (reflected in the Planned Capability Loss Factor (PCLF)) in order to maintain "Keeping the Lights On (KLO)" strategy. The document further stated that the Eskom generation fleet had experienced 15 years of under-investment in capital expenditure (capex) which is largely the result of cost cutting due to financial and capacity constraints
The board submission in 2015 indicated that 80% of the coal fleet capacity is in urgent need of major equipment restoration & replacement in order to achieve a technical life of 60 years.
During the tenures of Brian Molefe and Matshela Koko, Eskom generating plant performance improved significantly. However, when the new board took over these improvements were reversed and we are now paying the price. Under this new Eskom leadership we have witnessed a trend of loadshedding at a scale which has never been witnessed in the history of Eskom.
What is also not being understood is that this loadshedding is permanently accompanied by the expensive utilisation of diesel. In fact, whilst it is obvious that communities and the rest of the economy continue to suffer under loadshedding, what NUMSA demands is that Eskom and Minister Pravin Gordhan disclose companies that as are the beneficiaries and make money out of loadshedding and how much load shedding has cost Eskom out of burning diesel.
In fact, both Minister Pravin Gordhan and his IPP board have not just misled the President on loadshedding and lied that loadshedding will be over by January, they also sold the President a wrong and distorted turnaround strategy. They lied to the President and to the country that the unbundling of Eskom will fix Eskom’s woes and challenges when in reality this unbundling – despite the fact that it does not even come close to addressing Eskom’s financial challenges – the actual mission in conquering transmission as a byproduct is to hollow out of Eskom, Eskom’s system operator, the Eskom grid, peaking plants, transmission sub-stations and servitudes. Their actual mission is to fast track the penetration of IPPs and the acceleration of the decommissioning of coal power stations. Worst of all, Minister Pravin Gordhan pulled wool over the eyes of the entire nation that Eskom is not up for privatization.
This is a lie but because Minister Pravin Gordhan repeats it, the President repeats the lie that Eskom is not being privatized when in actual fact every power station that is being decommissioned is being replaced on the grid by REIPPs. REIPPs are owned by the private sector and therefore this constitutes nothing but privatization.
All of this is done at the back of the worst propaganda and lies. For instance, the other lie which was communicated through the President – who is permanently ‘shocked’ and lied to by the same Minister and the same board – is that Eskom plants have reached the end of their lifespan when in fact, for years the lifespan of Eskom power stations were extended through the decision of a competent board. This current board, however, took over this legacy of extending lifespan of power stations.
It is the very same board which made a submission to Nersa, in the Generation IRP which basically articulated that the current power stations can be extended – contrary to what they are lying to President Ramaphosa about that the lifespan of Eskom power stations have reached the end of their lifespan. Below is the IRP 2018 submission:
NUMSA wants to reiterate its call to the President that the time is now to remove the Eskom board and Minister Pravin Gordhan and ensure that Eskom has leadership with the necessary requisite skills and that the board must be reconstituted with representatives from labour, business and civil society with at least 70% of the board comprising of Engineers.
We insist – on an urgent basis – that the President must convene a meeting with NUMSA, NUM, Solidarity and all competent Engineers from Eskom with one item on the agenda: to put together a team consisting of Eskom engineers including all those who have been marginalised by the current leadership and those who left but have solid knowledge on how to save Eskom. Their task must be to end load shedding with immediate effect. We are further calling on the President to respond to the following demands:
NUMSA repeats its demand that government cancels or re-negotiate coal contracts, IPP contracts Bid Windows 1,2,3 and target no less than R10 billion year-on-year on the IPP costs.
One of the things that is shocking about the leadership of Minister Pravin Gordhan in the SOEs which are confronted with real challenges, be it SAA, Transnet or Eskom, at the least, this is how NUMSA has experienced his leadership:
We don’t think that this is related to his age, but the Minister has this bad tendency that in fixing any problem in an institution, he adopts a leadership style where holy cows are allowed. By this we mean that, for example in SAA, the Minister would not move swiftly in addressing areas that are financially bleeding SAA such as the cost of leasing aircrafts, the cost of evergreen procurement contracts, etc.
If one considers Eskom, the Minister does not see the need to deal with IPPs which are financially bleeding Eskom; he would not be the one who is prepared to deal with the high cost of primary coal. Our deeper analysis of this leadership style is that the Minister will do everything to protect the interests of the dominant class which unfortunately is WMC in our country. We also assume that this is fuelled by this popular myth that to protect the interests of the interest of the exploitative property-owning class, fuels more foreign direct investment which is an absolute. It is also our view that his style of leadership also accompanied by being personal, arrogant and perceived invincibility. In fact, we are of the view that the Minister suffers from his own personal cult and as such he is the kind of person who – due to personal differences – is prepared to collapse and destroy an institution. In fact, his behaviour and his political attitude and expose against black leadership and black individuals who happen to occupy leadership positions in SOEs, reminds us and unfortunately borders on the old, racist, prejudiced kind of an attitude.
Our interaction with all the competent black executives which he has dealt with and destroyed, brings us to the conclusion that Minister Gordhan is very condescending towards black people which borders on racist tendencies. The only time he respects a black person is when that person becomes his lapdog which has to respond to the owner’s instruction stokes. NUMSA wants to be on record that as an organisation, as an attitude of mind and as a way of life, we are non-racial, non-sexist and firmly believe in a democratic South Africa where both black and white must be treated as South Africa where equality is our attitude of mind and a way of life. However, we refuse and reject that out of all the people who applied for the position of GCEO at Eskom, there is not a single black woman, black African male, with competent Engineering skills to run and manage a strategic utility such as Eskom. Instead, what Minister Pravin Gordhan could find for us as a nation is a lawyer by the name of Andre de Ruyter. We attribute the current outcome and the results of the leadership we have at Eskom including the board and the current GCEO, Andre de Ruyter, to the very same attitude of Minister Pravin Gordhan.
Having reflected on Hnr. Minister Gordhan, it is our take that he presents himself as the Rambo of the Cabinet and SOEs where all other stakeholders must be extras in his movie. Only his ideas and those of his cronies can be right. He is not open to an honest and a “no holy cows” search for solutions to the problems engulfing our SOEs. He is quick to label those who call for him to account as obstructive and part of the state capture fight back. What happened to the principle of the “Battle of ideas” which used to characterise the ANC debates? To Pravin Gordhan, everyone is allowed to present their views as long as they are consistent with his views. You can’t solve the problems of SOEs if you have holy cows and only work with people who are only agreeable to you. In fact he is a dictator who is intolerant to alternative views.
NUMSA remains doubtful that President Ramaphosa and his team led by Minister Pravin Gordhan, have no mission to destroy Eskom. Firstly, it is their collective messaging both in the SONA and in Minister Pravin Gordhan’s so-called Special Paper which constitutes the roadmap for unbundling Eskom where they maintain an unsolicited and false propaganda which is communicated anyway, that Eskom is a Monopoly and that their reckless costly unbundling is a vehicle to undo this monopoly of Eskom. It is like walking into a public clinic in a village in deep rural Transkei or any rural village and calling and convincing all locals that “since this clinic is serving all of you in this village, it is a monopoly; it must be unbundled, be broken up and this clinic needs competition”.
NUMSA is of the view (and we have never been friends of Gwede Mantashe), that we are the first to admit that having faced the unbearable arrogance of Jeff Radebe, the arrogant and dictatorial tendencies of Pravin Gordhan, we have no option but to make a clarion call and plead with the President of our country, His Excellency President Cyril Ramaphosa – who is being permanently lied to by the very same Minister Gordhan and his Eskom board – to take decisive action and a decision to appoint a new Minister of Public Enterprises in the best interest of the country for all the other SOEs. However, we have no option but to strongly suggest that Eskom be under the leadership of the Minister of Mineral Resources and Energy, Minister Gwede Mantashe and be shifted away from Public Enterprises. This only on the basis that Minister Mantashe has adopted a democratic approach of advocating a democratic debate about each source of energy with a vision to create an energy mix which will be suitable for South Africa’s energy needs. Such an energy mix must respect a just transition and at a pace and a cost which South Africa can afford.
In the debate about energy sources and the energy mix there must be no holy cows. For instance, we must have a democratic discussion as to whether nuclear, gas, renewable energy, whether the latest clean coal technology is not a viable option for the movement from fossil fuel to green energy sources. Furthermore, we must debate on what is the most cost effective option for our country’s energy needs. It is against this background – having listened to opportunistic right-wing voices who present themselves as being smarter than rest of the country – that as NUMSA we have identified that these forces have taken a capitalist right-wing decision (this does not make Mantashe a qualified socialist) but we are very clear that the these right-wing capitalist forces who do not care about the continued worsening of the conditions of the working class who are the victims of crime, unemployment, and all manner of social ills, have targeted Mantashe for isolation in order to destroy and further present him as being backward and a fanatic champion of fossil fuels.
Our message to them when it comes to the on-going debate about the future in our energy is: Hands Off Gwede Mantashe! This attack on Eskom reminds us of the rich history with its early life in the Eastern Cape where Nongqawuse, Intombi ka Mhlakaza, made a clarion call that we must destroy our livestock because real wealth is coming. The people of the Eastern Cape are yet to see this wealth and this is unfortunately what we continue to smell with these IPPs – it is like following a mirage at the risk of the entire economy.
NUMSA calls on President Cyril Ramaphosa that among the measures that he must decisively act on in light of the current situation confronting our energy sector, he must move swiftly in setting up an Eskom renewable energy company that will be allocated 70% of the built programme of the IRP 2019.
NUMSA wants to reiterate that the so-called plan or roadmap presented by Minister Gordhan is not an Eskom plan, but an IPP plan as it is promoting the establishment of a transmission company owned by the state by March 2020 whose single mission will be to grow more IPPs. There is absolutely no agenda to grow Eskom as all Eskom power plants will be decommissioned and replaced with expensive and pathetically unreliable REIPPs that will conquer and ensure that South Africa’s entire energy sector is colonised, foreign-owned and imperialist in character. So, openly and right in front of our eyes, colonisation of our energy sector is continuing by other means, championed by Tito Mboweni and Pravin Gordhan who claim to be a core that is destroying state capture when in essence they are championing a new form of backward, racist form of white monopoly state capture under Ramaphosa’s leadership. Yet, they want to define as a monopoly for their selfish ends.
If Minister Pravin Gordhan and the current were interested in turning around Eskom, at the centre of their plan would be a clear strategy to not only increase the continuously declining sales but also how to double the Eskom sales volume. However, it is our considered view that in Pravin Gordhan’s roadmaps, there is no agenda to fix Eskom – let alone to make sure that there is a viable turnaround plan in place. What he is currently pursuing is a now hidden, and a now open plan for the IPPs; this is despite the globally-known fact that IPPs have failed in several parts of the world such as Germany, Kenya and Australia.
As we speak, Germany is commissioning and rolling out clean coal power stations with coal which is imported from South Africa. In fact, our simple suggestion to President Cyril Ramaphosa and those who are destroying Eskom in the name of reducing carbon emissions and closing down our coal powered stations, is that parallel to their obsession, they must have the guts to also ban the exportation of South African coal, exportation of chrome ore, banning of the exportation of scrap metal.
This point is being made to deal and to curb the political, corrupt capitalist elite and right-wing opportunism for the sole purpose of championing a job-led industrial strategy in our country, South Africa, which is a victim of neo-liberal policies that are directly responsible for de-industrialisation and massive job losses and unbearable inequalities.
We are calling on Minister Mantashe and President Cyril Ramaphosa to remain firm and resolute in providing leadership that ensures that we have an energy mix in the country where all sources of energy including nuclear must be up for debate. The outcomes must address our country’s basic needs at a pace and cost that our country can afford.
NUMSA repeats its demand that the Eskom turnaround plan must be very clear and speak to how it will reduce Eskom’s primary coal costs, IPP costs, primary energy costs and diesel costs which is basically milking the public purse. We remain firm in demanding to know each and every company which is benefitting from the national crisis of load shedding.
The problem with Eskom is not only the lack of maintenance on its fleet that is ageing. What compounds Eskom’s challenges – beyond the challenge of maintenance is that the planned capability load factor in the last 5 years shows that Eskom’s real problem is the quality of maintenance. Eskom is not getting a return for the money they spend on executing maintenance. For example, it is a generally known fact that one of the opportunistic costs is fake companies with no capacity which are playing the role of the middle-man fronting in the name of BEE. NUMSA is firm that there should be no compromise in dealing with BEE in bundling but such should not be manipulated by white companies which are owned and controlled by male chauvinists to enrich themselves in the name of BEE.
This is why right back during the period of tender boards where there was 90:10 empowerment score card, NUMSA maintained that without the state intervening in the economy, e.g. in the road construction and make sure that previously disadvantaged and immensely economically-disadvantaged if the current government has to date not made sure that it buys a plant for black construction companies, for the past two decades it was completely impossible for black companies to compete with Group 5, M&R, Aveng, etc. From where we stand, our political, ideological instinct tells us that some of these big 5 companies collapsing and being liquidated is a self-orchestrated and stage-managed sham to make sure that they protect their untransformed accumulation path at the expense of poor black entrepreneurs in the construction space which remains completely untransformed due to having been absolutely failed by the ANC government. In our view this is the fault of the current board.
We also believe that the declining sales volume poses an existential risk for Eskom. This makes it more urgent to set up an Eskom Renewable Energy Company that will execute 70% of the renewables in the IRP. As things stand, government is privatising the provision of electricity through the IPPs.
This is why government wants to set up an Independent Transmission Company under Eskom by March of 2020. They will not privatise Eskom but the basic provision of electricity will be privatised through the IPPs unless an Eskom Renewable Energy Company is set up to meaningfully participate in the provision of electricity from renewable energy technology. Anything less than this is President lying with a straight face and without being misled and lied to by Minister Pravin Gordhan and the Eskom board.
It is against this background that NUMSA, despite having been expelled and being a victim of political and ideological liquidation by the ANC-led alliance through the labour federation Cosatu in 1987 which was formed by 7 unions which later merged to form NUMSA in 1987. These unions were fully supported by their vanguard Party in the ANC-led alliance, the SACP, in the expulsion of the 340 000 members for purely saying that capital has restructured itself globally and that it was therefore time that the federation considered organising workers along the value chain as per the NUMSA 2013 Special National Congress resolution. This is the same resolution which was taken by NUMSA’s sister unions such as IG Mittal in Germany which is organising along the value chain.
The salient point we do want to make against all odds and what we would have gone through as individuals – those of us who have formed part of NUMSA and its revolutionary leadership and membership – whilst we have nothing much to say about the current Cosatu leadership – what comrade Zingiswa Losi, the current Cosatu President, said in the January 8th that despite our worst experience of the current leadership of Cosatu, we believe (as an attitude of mind and a way of life) that it was in the best interest of workers’ interests.
This is the reason why NUMSA has consistently and unapologetically maintained that as a union, NUMSA, having marched side-by-side and jointly with NUM, we have consistently maintained, publicly on all platforms, that the sooner NUM and NUMSA’s joint action to fight capitalist right-wingers in Eskom is translated into a joint, militant, red, revolutionary campaign championed by both SAFTU and Cosatu, as nothing less than a joint minimum programme in the best interest of the working class and the poor, such would be a revolutionary act in the interest of the working class against the current auctioning of our country’s SOEs, against right-wing austerity measures, against the fake colonial and exploitative NMW of R20/hour ; against the now hidden and now open privatisation under the leadership of President Cyril Ramaphosa under the “New Dawn”.
In fact, NUMSA, through this statement, wants to make a clarion call to both the leadership of Cosatu and SAFTU, with key leaders of their strategic affiliates must have a bilateral to discuss the ever-worsening working class conditions and the necessary programme to fight back in defence of workers’ hard-won gains as fighting back is the best form of defence. One of the key strategic debates that this federation – beyond discussing the unity of their constituency in struggle and how we unite the entire working class – is how we unite the entire working class this includes the unity of workers from these two federations in struggle and how we can make sure that NUMSA, NUM and AMCU members as well as all employed and unemployed workers are united in our pursuit of the revolutionary class struggle for fundamental change in the best interest of the working class and the poor.
Aluta continua!
The struggle continues!
Issued by Phakamile Hlubi-Majola, NUMSA National Spokesperson, 12 January 2020
