Vavi: South Africans Must Not Bear the Cost of Eskom Corruption

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JEREMY MAGGS: For many in South Africa, Eskom has become synonymous with failure and corruption. Once again, the burden falls on ordinary citizens. The state-owned utility is pressing for higher tariffs at a time when households and businesses are grappling with a fragile economy. But why should citizens bear the consequences of mismanagement, tender fraud, and, in many instances, blatant looting?

Listen/read: ‘Corruption ultimately makes the poor pay’ – Andy Mothibi [May 2024]
Read: Nersa confirms R54bn secret settlement with Eskom

This issue has been raised by the South African Federation of Trade Unions [Saftu], whose general secretary, Zwelinzima Vavi, argues that this is unacceptable. Zweli, why do you think citizens are disproportionately paying for Eskom’s corruption? What is your main argument?

ZWELINZIMA VAVI: We are extremely disappointed and frustrated that the individuals identified in the Zondo Commission as being partially responsible for our current predicament are the same people we are expected to refer to as “honourable members” of Parliament. That’s what drives us crazy.

These same individuals have a lot to say regarding the crisis we’re facing. Look, Jeremy, over the past 16, 17 years, we’ve seen a tariff increase of more than 500% at Eskom—unprecedented and completely shifting the burden of the crisis from its creators to ordinary people: small businesses, the unemployed, the marginalised, and even large corporations. The repercussions are becoming overwhelming.

Read: Major power users urge Nersa to revisit Eskom tariff determination

There’s not a day that goes by without announcements of shutdowns or job cuts, whether from large or small firms. Twelve thousand jobs have vanished from the smelters in South Africa. ArcelorMittal South Africa is on the verge of collapse, and many others claim they cannot sustain operations. The unsustainable cost placed on companies due to Eskom’s failures is a driving factor.

We are furious about this situation.

We are now facing nearly a 9% increase for next year and the following two years, which is three times the rate of inflation.

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As you know, municipalities impose their own charges—10% for some, up to 14% for others—pushing our total increase to nearly 18% or 19% consecutively. This trend cannot continue.

JEREMY MAGGS: You mention an unbearable burden. Yet Eskom claims to have a debt relief strategy intended to safeguard consumers. I imagine you disagree with that assertion.

ZWELINZIMA VAVI: Absolutely. We maintain that the entire structure of Eskom has become untenable. It is unacceptable to expect citizens to fund corruption with these exorbitant payments.

For instance, we contend that Eskom’s R400 billion debt arose from cost overruns and significant corruption seen at Medupi and Kusile, forcing us to pay billions to the World Bank.

That is why we demand that these amounts be declared as odious debt, meaning that the World Bank would have knowingly financed corruption associated with Medupi and Kusile, which ultimately benefited the ruling party via Chancellor House—facing scrutiny abroad but escaping accountability here in South Africa.

Read: Chancellor House made 5,000% return on Hitachi investment – Sec [Oct 2015]

The victims of this corruption are not in the United States; they are here in South Africa.

JEREMY MAGGS: Ironically, might you now find yourself aligned with Business Leadership South Africa [BLSA]? Its CEO, Busisiwe Mavuso, states that Eskom’s pricing structure protects the utility from cost discipline while penalizing consumers. She asserts that the remedy lies in expediting a competitive electricity market. Do you agree?

ZWELINZIMA VAVI: She’s correct regarding the first point, but misguided on the second. Technically, we are in a competitive market. Eskom is currently subsidizing independent power producers (IPPs) by approximately R20 billion a month. This is a form of backdoor privatization.

Read: Eskom’s pricing makes urgent competitive markets necessary

Eskom was constrained from rolling out renewables for a period, allowing IPPs to fill that gap and introduce competition.

As reflected in Eskom’s balance sheet, the cost of this arrangement forces us to subsidize IPPs with R20 billion.

That’s not fair as Eskom sells electricity to them at inflated prices.

We insist on transparency regarding the contracts made with these IPPs, demanding public disclosure and a full parliamentary inquiry into why these agreements have remained secret for so long.

JEREMY MAGGS: Can you address to what degree you believe blame should be directed towards the National Energy Regulator of South Africa [Nersa]? They’ve had to revise tariff increases after a miscalculation. Do they bear some responsibility?

ZWELINZIMA VAVI: Indeed, they do. This is a case of regulatory capture. They’ve acted as “Yes, boss. Yes, ma’am” to Eskom, never questioning how sustainability is possible when the utility requests yearly tariff hikes of 20%, 25%, or even 30%.

Read: Nersa’s errors will impact you severely
Listen/read: Eskom’s new tariff plan will shock solar users

Despite holding public hearings, they’ve never drawn a line in the sand or demanded accountability from Eskom regarding structure, sustainability, or efficiency. We should be discussing coal procurement—how much our local companies charge and why it’s so expensive when South Africa has vast coal reserves.

Nersa isn’t asking these critical questions, and we are extremely concerned. This is what we define as regulatory capture.

JEREMY MAGGS: Zwelinzima Vavi, general secretary of the South African Federation of Trade Unions, thank you for your insights.

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