Lynda Loxton
While local authorities take desperate measures to get consumers to pay their bills, the final touches are being put to an ambitious plan to get South Africa’s electrification programme back on track.
Minerals and energy department deputy- director Wolsey Barnard told the parliamentary minerals and energy committee this week the plan involved dividing South Africa into about five regional electricity distributors (Reds), which would be joint- venture companies formed by Eskom and local authorities.
This, he said, would be in line with world trends whereby electricity utilities are being forced to see themselves as businesses and act accordingly. This is considered particularly important in South Africa, where the distribution business is highly fragmented, unevenly developed and, in most cases, financially unviable.
For example, said Barnard, of the 870 local authorities, 420 are licensed as distributors by the National Electricity Regulator. Of these, between 150 and 180 are in serious financial difficulties while most of them suffer shortages of skilled staff and generally provide a poor service to consumers. Eskom is called in on a virtually daily basis to help them out.
A succession of special commissions has been trying to find a solution to the problem since about 1993 and now the latest, the Electricity Restructuring Inter-departmental Committee, is nearing the end of an exhaustive series of meetings with interested parties in a bid to map out a way forward.
Its basic task was to find a way to get the electrification programme back on track providing low-cost electricity with some cross-subsidisation if necessary. Service standards would have to be improved and maximum use would have to be made of available investment capital, which called for the establishment of a business unit to run the whole process.
Various models were considered and it was finally decided to establish the Reds, which would be public companies. Then came the tricky question of ownership. It was recommended that shares in the Reds should be owned by the municipalities and Eskom, which could exchange their assets for shares in the company or lease their assets to the Reds.
Barnard admitted that this raised tricky issues for Eskom, whose assets have been built up with loans worth millions of rands from mainly overseas institutions. Whatever structure was finally agreed on would have to be approved by these institutions, which would have to be satisfied that their loans could and would be repaid.
To help the Reds get on their feet, the restructuring committee also suggested that a levy or tax be imposed on electricity charges (at a rate still to be decided) but that this would only last until the electrification programmes were completed.
The scheme is due to be discussed at a ministerial workshop in Pretoria on August 22 and it is hoped that a professional transformation team can be appointed by the end of September.
It will then take about six months to set up a restructuring task force and about a year before the new system is up and running.
Several committee members said all this was taking far too long, and in the meantime municipalities were going bust. Barnard admitted it was a long, slow process, but said the complexities involved, the different and sometimes conflicting interests, made it even more important to ensure that the process was as wide ranging and all-inclusive as possible.