<\/p>\n
South Africa cannot afford for Johannesburg to fail, and the city\u2019s electricity supply is now genuinely at risk. The R5.3 billion debt that the city owes to Eskom is not being resolved in a sustainable way, and the consequences became more concrete last week.<\/p>\n
Eskom granted City of Joburg (CoJ) a brief reprieve, agreeing to delay by 30 days its Promotion of Administrative Justice Act (PAJA) process \u2013 the legal procedure Eskom must follow before it can cut electricity supply to the city. The delay was brokered by Electricity and Energy Minister Kgosientsho Ramakgopa.<\/p>\n
Read\/listen:
Court halts Eskom\u2019s cut-off or take-over ultimatum
Joburg not absolved from its obligations to pay Eskom \u2013 Ramokgopa<\/p>\n
But in announcing the delay, Eskom noted that Johannesburg missed a 5 June deadline to pay its current account, despite having paid R1.2 billion toward its accounts since the PAJA process began.<\/p>\n
\nBecause the city missed that deadline, Eskom is now resuming the PAJA process, which could ultimately mean cutting electricity supply to City Power.<\/p>\n<\/blockquote>\n
The city\u2019s weak financial position makes settling the legacy debt extremely difficult. Our analysis shows Johannesburg is nearly a year late on average in paying its suppliers, and Eskom is no exception. The BLSA Council is meeting this week to consider analysis of Johannesburg\u2019s predicament and discuss how business can support its recovery. There is much to be done.<\/p>\n
The city has consistently been unable to collect the revenue it forecasts in its own budgets. It spends far too little on maintaining its infrastructure, let alone investing in new infrastructure. Its budget is consumed by consumption spending but it fails to provide the services that business needs to be competitive and contribute to the growth of the South African economy.<\/p>\n
Read\/listen:
Johannesburg\u2019s decline since the 2010 World Cup is stark
Big business commits to fixing the City of Joburg
Business warns Joburg crisis risks South African recovery
Eskom warns of power cuts to \u2018defaulting\u2019 City of Johannesburg
Joburg street lights switched off over electricity debt<\/p>\n\n\nADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Johannesburg is one of many local government entities indebted to Eskom, but it is the largest, and resolving this debt is critical to Eskom\u2019s own financial recovery. As I wrote two weeks ago, this debt is one symptom among many of the City\u2019s mismanagement that organised business has flagged as a critical risk to the broader economy.<\/p>\n
\nRestoring Eskom\u2019s financial position matters beyond Johannesburg.<\/p>\n<\/blockquote>\n
It is essential to stabilising Eskom and delivering the competitive electricity market we have been working toward. Business is committed to supporting a resolution to Eskom\u2019s municipal debt crisis.<\/p>\n
Reform roadmap\u00a0<\/strong><\/p>\n
However, at the same time, we must make progress on the wider electricity reform roadmap that the National Electricity Crisis Committee has driven over the past several years. That roadmap leads to a competitive electricity marketplace with multiple suppliers competing for customers.<\/p>\n
\nCentral to that roadmap is the requirement for an independent transmission system operator (ITSO) that serves as a neutral intermediary providing access to the grid.<\/p>\n<\/blockquote>\n
The policy is clear, in our view, that this intermediary must own the grid\u2019s assets, not merely operate them on Eskom\u2019s behalf. Ownership matters because it removes any possibility that the entity running the network could favour itself or a related party over competitors.<\/p>\n
President Cyril Ramaphosa backed this interpretation in the February State of the Nation Address, after Eskom signalled it intended to establish an ITSO while retaining ownership of the assets. That position was reiterated in a Presidency statement earlier this month.<\/p>\n
\n\nADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Read\/listen:
Grid bottlenecks continue to slow power projects
Curtailment, conflicts of interest and cash flow: Eskom\u2019s tightening grip on IPPS
Eskom power shift: Grid reforms and energising competition<\/p>\nAsset ownership matters for two practical reasons. First, it is the clearest route to attracting major new investment into the grid infrastructure South Africa urgently needs.<\/p>\n
Second, it is essential to a genuinely fair market \u2013 suppliers need confidence that they can access the grid on equal terms, without a competitor enjoying preferential treatment by virtue of owning the network they all depend on. An operator that runs the grid but doesn\u2019t own it is like asking a competitor in a race to also act as the umpire.<\/p>\n
\nThe unbundling of the ITSO has been much delayed, and there is still no firm implementation timetable. A task team established by President Ramaphosa to finalise the unbundling has been given an extension to publish its report by the end of June.<\/p>\n<\/blockquote>\n
That extension came alongside the Presidency\u2019s announcement, earlier this month, confirming that the ITSO will own the transmission assets. The unbundling itself is not straightforward \u2013 Eskom has numerous lenders who need assurance that restructuring will not undermine their creditor rights. But utility restructurings of this kind have been achieved successfully elsewhere in the world. Where there is genuine will, a way can be found.<\/p>\n
Read: Eskom spinoff plan raises credit profile concerns<\/p>\n
Business has that will, because the prize is significant: not only improved electricity reliability, but downward pressure on prices over time. Since load shedding first struck 18 years ago, electricity prices have increased tenfold, far outpacing inflation.<\/p>\n
\n\nADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n
\nElectricity prices were unsustainably low before that period, which was part of why we saw such chronic underinvestment in generation capacity.<\/p>\n<\/blockquote>\n
But the answer now is a genuinely competitive market that lets price discovery happen properly, with multiple providers competing for customers. That competitive dynamic is essential to restoring the competitiveness of our economy.<\/p>\n
Years of steep electricity price increases have eroded the competitiveness of many energy-intensive manufacturing sectors, accelerating deindustrialisation we can ill afford. Reversing that requires both a competitive electricity market and an independent transmission operator that all suppliers and consumers can genuinely trust.<\/p>\n
Read:
Eskom Green may be on a risky path
To be or not to be green \u2013 that is the question, Eskom
Ramaphosa and South Africa\u2019s stabilising electricity system<\/p>\nAs I wrote a fortnight ago, business stands ready to support credible public sector partners who are prepared to deliver \u2013 whether that is the City of Joburg or Eskom and other state-owned entities. But that support is premised on a real commitment to following through on established policy, because policy follow-through is what will restore economic growth.<\/p>\n
We will support Eskom in recovering the debts it is owed. But we remain equally focused on ensuring the electricity market that emerges from this process is one that is genuinely, structurally competitive \u2013 not reform in name only.<\/p>\n
*Busi Mavuso is the CEO of BLSA\u00a0<\/em><\/p>\n<\/p><\/div>\n
#Solving #Johannesburgs #debt #crisis #critical #Eskom #CoJ<\/p>\n","protected":false},"excerpt":{"rendered":"
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