{"id":1169,"date":"2020-03-26T13:39:40","date_gmt":"2020-03-26T11:39:40","guid":{"rendered":"http:\/\/marxistworkersparty.org.za\/?p=1169"},"modified":"2020-04-30T16:52:52","modified_gmt":"2020-04-30T14:52:52","slug":"eskom-the-loadshedding-crisis","status":"publish","type":"post","link":"https:\/\/marxistworkersparty.net\/?p=1169","title":{"rendered":"Eskom & the Loadshedding Crisis"},"content":{"rendered":"\n

For an Independent Working Class Programme<\/strong><\/h2>\n\n\n\n

by Shaun Arendse<\/strong><\/p>\n\n\n\n

What does resolving the Eskom\ncrisis look like for the working class? A reliable and uninterrupted supply of\naffordable electricity in every household, community and workplace. Job\nsecurity, decent wages, and workers\u2019 rights for all Eskom employees, including\nthose of the contractors that depend upon it. The corrupt managers, politicians\nand business people that systematically looted Eskom facing their day in court.\nThis would be the basic outline.<\/p>\n\n\n\n

However, these are not the\npriorities of the capitalist class. They are not trying to resolve the Eskom\ncrisis in the interests of the working class majority. Rather, they are jockeying\nfor position amongst themselves for a slice of the enormous wealth that Eskom\ncontrols, and to profit from future changes in electricity generation as the\nclimate crisis increases pressure for alternatives to coal.<\/p>\n\n\n\n

The stakes are high. Eskom is a\ngiant within the South African economy. The money that it spends in one year is\nmore than four times that of the next biggest state-owned enterprise (SOE),\nTransnet. Operating costs run at R140 billion per year \u2013 R50 billion on coal,\nR33 billion on wages, and the remaining R57 billion on fees to contractors and\nconsultants for maintenance and other services. This vast budget does not\ninclude the R337 billion spent in recent years on Medupi, Kusile and the\nlesser-known Ingula hydro-electric plant, or the R23 billion per year (and\ngrowing) spent on loan interest payments.[1]<\/a><\/p>\n\n\n\n

The struggle over who will be\nable to put (or keep) their fingers in this profitable pie is a bread and\nbutter question for the capitalist class. It is reflected within the ANC as the\ntug-of-war between the supporters of Ramaphosa and the supporters of Zuma. It\nlies behind Bathabile Dlamini\u2019s clumsy proposal to move Eskom from the\nDepartment of Public Enterprises to the Department of Energy, and the differences\nwithin the cabinet on the future role of so-called \u2018Independent\u2019 Power Producers\n(IPPs \u2013 see below).[2]<\/a>\nOutside the ANC, the DA champions allowing the \u2018Eskom monopoly\u2019 to collapse in\nfavour of IPPs. The EFF and other capitalist political and business groups flirt\nwith reviving a new nuclear-build programme.[3]<\/a><\/p>\n\n\n\n

Ultimately, the lack of agreement\nover Eskom\u2019s future reflects the more general impasse of South African\ncapitalism. An intensified struggle within the ruling elite is one of its\nsymptoms. This is blunting the ability of the Ramaphosa government \u2013 the\ncurrent capitalist \u2018executive committee\u2019 \u2013 to impose a solution on the\nsquabbling factions, whether they are inside or outside the ANC. This has wider\nimplications for capitalism\u2019s sick economy. The growth in Eskom\u2019s debt to R450\nbillion is a systemic danger. It is one of the issues at the heart of the\nthreat by credit ratings agency Moody\u2019s to downgrade SA to \u2018junk\u2019 with all the\nconsequences that would have for jobs and living standards (see SA\u2019s\nEconomic Crisis \u2013 No Way Out for the Working Class Under Capitalism<\/a>).<\/p>\n\n\n\n

Most people agree that Eskom needs \u2018fixing\u2019. But this means one thing for the capitalist class and something entirely different for the working class. It is the capitalist class\u2019s government that is in power. Therefore, only different capitalist \u2018solutions\u2019 are on the table. All of which will come at the expense of workers\u2019 jobs, higher electricity prices, cut-offs, and millions of people being forced to remain \u2018off-grid\u2019. This demands that the working class put forward an independent programme that calls time on the capitalist class\u2019s self-interested management of Eskom.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Seeds of the Crisis<\/strong><\/p>\n\n\n\n

After the 1994 elections, the\nelectrification of the country was high up on the list of expectations of the\nnew ANC government. At the end of the apartheid-era less than one-third of\nblack households had access to electricity. Under enormous pressure to improve\nthe lives of the working class who had lifted them into power, household\nelectrification rose from 35% in 1990 to 82% in 2008 when loadshedding first\nbegan. These figures do not fully capture the scale of electrification, as the\npopulation increased by nearly 12 million, or 25%, in this period.<\/p>\n\n\n\n

But the embrace of neo-liberal\neconomic policies under the ANC\u2019s Mandela and Mbeki governments laid the\nfoundations for the Eskom crisis. This huge increase in electrification was\nachieved without building any new power stations. In fact, the Mbeki government\nplaced a moratorium on any new building by Eskom, trusting the capitalist\nmarket to fill the growing electricity supply gap via IPPs. This did not\nhappen.<\/p>\n\n\n\n

As early as 1998, Eskom management\nwarned that demand would outstrip supply by 2007. Mbeki ignored these warnings because\nthe ANC\u2019s 1996 neo-liberal Growth, Employment and Redistribution policy (Gear) envisaged\nthe commercialisation and privatisation of all services provided by the state.\nThe \u2018user pays\u2019 principle that Tito Mboweni is famous for today was the new\nmantra. Eskom was top of the privatisation list. But attempts to sell it failed\nas Eskom\u2019s electricity prices were then amongst the lowest, if not the lowest,\nin the world. Further, the refurbishment and building implied in the engineers\u2019\nwarnings would require borrowing in the money markets. This debt would make\nEskom even less attractive to potential buyers.<\/p>\n\n\n\n

By 2008 the warnings of the engineers\ncame to fruition with Eskom was forced to resort to rolling blackouts \u2013 load\nshedding. Upgrades were further delayed by preparations for the 2010 World Cup.\nEskom was under orders to keep the lights on come what may to uphold the ANC\ngovernment\u2019s prestige. <\/p>\n\n\n\n

Mbeki lifted the building\nmoratorium in 2004 paving the way for Medupi, Kusile and Ingula to make up the\nshortfall in energy demand. But it was used to give capitalist investors linked\nto the ANC \u2013 including the ANC\u2019s Chancellor House finance vehicle \u2013 the\nopportunity for self-enrichment via corrupt contracts with multinationals like Japan\u2019s\nHitachi. Sixteen years later Medupi and Kusile are still not finished. As a\nstop gap, between 2007 and 2012, two new diesel and gas plants were completed\nand four mothballed apartheid-era coal power stations refurbished and brought\nback into use.<\/p>\n\n\n\n

The growing pressure on the\nelectricity supply had other consequences. Eskom\u2019s shrinking \u2018reserve margin\u2019,\nwhich allows power stations to be taken offline, meant maintenance fell even\nfurther back. Maintenance issues were worsened as low-quality coal began finding\nits way into the system as quality control standards were by-passed as\ncorruption grew into a cancer.<\/p>\n\n\n\n

<\/div>\n\n\n\n

State-capture& Eskom<\/strong><\/p>\n\n\n\n

The stacking of SOE boards by Zuma\u2019s ministers to facilitate profiteering via the award of tenders and signing of contracts with government began the wholesale looting of Eskom. The Guptas sucked R-billions out through their companies Tegeta, Oakbay, and Trillian. But they were simply the most brazen. For example, in a two-year period, during and after the 2014 loadshedding crisis, R200 million was siphoned-off via diesel-supply contracts with front-companies owned by friends and family of senior Eskom staff. The rampant manipulation of tenders at Medupi and Kusile was decisive in the explosion of Eskom\u2019s debt. The cost of these projects expanded from R150 billion when construction began, to over R300 billion today. Also decisive were Eskom\u2019s coal contracts which a 2015 report described as a \u201cblack hole\u201d.<\/p>\n\n\n\n

With one exception, all of\nEskom\u2019s coal-fired power plants are linked to \u2018tied-mines\u2019. The mining\ncompanies that operate them typically sign thirty to forty year contracts with Eskom.\nThey agree to supply coal at low-cost fixed rates via conveyor belts running directly\ninto adjoining power stations. The mining companies make the bulk of their\nprofits through exporting coal after meeting their Eskom quota. Stephan\nHoffstatter\u2019s book License to Loot<\/em>\nsuggests that from 2001, Majuba, the only power station without a tied-mine,\nbecame a testing ground for the introduction of inflated short-term contracts.\nThese were not stop-gaps whilst long-term contracts were negotiated, but became\na new standard, with disastrous consequences for Eskom\u2019s finances.<\/p>\n\n\n\n

This opened-up the possibility of\nmaking a \u2018quick buck\u2019 from Eskom\u2019s coal budget. At the head of the new queue of\nprofiteers was the emerging layer of black capitalists. But success beyond\nMajuba depended on dislodging Eskom\u2019s long-term contracts with established\nmining companies. This is what lies behind the hysteria against so-called \u201cever\ngreen\u201d contracts in the hands of \u2018white monopoly capital\u2019 by the supporters of\nso-called Radical Economic Transformation. <\/p>\n\n\n\n

The Gupta\u2019s boldest and most\nbrazen state-capture projects included the scandal of over-priced and\nsub-standard coal from their Brakfontein coal mine and seizing control of the Optimum\ncoal mine from multinational Glencore. In both cases the amount Eskom paid per\ntonne of coal sky-rocketed. Further opportunities were opened up by Lynne\nBrown, then Minister of Public Enterprises, when she blocked Eskom from\ninvesting R1.8 billion to sink a new shaft at Matla power station\u2019s tied-mine.\nThis could have supplied Matla with low-cost coal for decades. Instead, Eskom\nspent an additional R5 billion in just two years to truck coal in. A 2015\nreport projected that over an eight-year period Eskom\u2019s growing reliance on\nshort-term contracts would inflate its coal spend by a cumulative R90 billion.[4]<\/a><\/p>\n\n\n\n

Trying to explain Eskom\u2019s\nproblems by claiming it is \u2018over-staffed\u2019 or does not charge \u2018cost-reflective\ntariffs\u2019 is nothing but a smokescreen. Rampant profiteering, corruption and\nlooting is the real cause of the Eskom crisis.<\/em><\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

RET vs WMC?<\/strong><\/p>\n\n\n\n

Those whose fingers have been\ncaught in the till encourage the idea that a struggle is underway between the\nforces of Radical Economic Transformation (RET) and White-Monopoly Capital\n(WMC). Hofstatter\u2019s book gives anecdotal accounts of how Zuma\u2019s Eskom deployees\ntried to win support for corruption from Eskom staff by banging the drum of\n\u2018transformation\u2019. Superficially, the struggle, for example, over the control of\ncoal contracts can seem to support this idea. But trying to fit the struggle\nover Eskom\u2019s future into a neat RET vs. WMC box falls apart under scrutiny. <\/p>\n\n\n\n

At every stage, Zuma and the\nGuptas were aided by so-called WMC in the looting of Eskom. As early as 2011,\nthe hijacking of a tender for steam generators at the Koeberg nuclear power station\nwas done in collaboration with French firm Areva. US firm McKinsey worked\nhand-in-glove with the Gupta\u2019s Trillian.[5]<\/a>\nUK based Deloitte has been forced to pay back R150 million it received from\nEskom in an irregular tender. Eskom has been selling electricity below cost to\nAustralian miner South32\u2019s two aluminium smelters for more than ten years \u2013\naccounting for 3% of Eskom\u2019s electricity output.[6]<\/a><\/p>\n\n\n\n

From the other side, the Zuma\nadministration repeatedly tried to reduce mining company Exxaro\u2019s share of the\nEskom coal budget. Under Brian Molefe, the renewal of Exarro\u2019s long-term\ncontracts with Arnot and Mafube power stations were blocked. The machinations\nof Lynne Browne at Matla mentioned above, were also against Exarro. This\ndespite Exarro being a Level 2 \u2018black-empowered\u2019 miner, i.e. 50%+\n\u2018black-owned\u2019.<\/p>\n\n\n\n

It is true that there is an\nimportant fault-line within the ruling class between the established, largely\nwhite-owned, capitalist monopolies and the black elite that controls the\ncapitalist state. Especially during an economic crisis, such as the one South\nAfrica is mired in today, this fault-line can be the source of friction. But it\nis important to keep a sense of proportion about it. The entire post-apartheid\npolitical and economic order is rooted in the historic compromise<\/em><\/strong> between white\nbig business and the black political elite. This compromise was, and remains, an\nalliance for the preservation of capitalism and the continued exploitation of\nthe working class (see The\nNegotiated Settlement and the 1994 Elections<\/a>).<\/p>\n\n\n\n

Black Economic Empowerment, the neo-liberal\neconomic framework that defends the profits of the monopolies, opening-up a vast\nmarket for tenders and outsourcing by limiting the role of the state and SOEs,\n\u2018new-order\u2019 mineral rights, and, crucially, Cosatu\u2019s alliance with the ANC, are\namong the mechanisms for managing that compromise, and sharing, albeit\nunequally, the spoils of capitalism.<\/p>\n\n\n\n

However, the excesses of the Zuma\nadministration threatened to undermine all of this. Especially under the blows\nof the 2007-09 world economic crisis, sections of the aspirant black capitalist\nelite needed a more aggressive policy to advance their interests. No real\ninnovation was required however. Zuma\u2019s state-capture project simply took\ntenderpreneurship to its logical conclusion in a semi-official crony\ncapitalism. The support that Ramaphosa now enjoys from big business is not\nbecause he is simply the \u2018tool\u2019 of WMC, as the RETers would argue, but because\nhe is committed to trying to restore some equilibrium within the ruling class.<\/p>\n\n\n\n

Ultimately, RET is nothing but a\nposture by a section<\/em><\/strong> of the black petty bourgeoisie. Their faux-radical nationalist\nrhetoric generates a lot of heat, but no real light. It is a crude attempt to\ntry and mobilise the black poor, the black working class and the black middle\nclass majority to support their capitalist aspirations. But there is never any\nserious attempt to organise and mobilise the black masses for action. This reveals\nRET for what it is: a negotiating stance.<\/p>\n\n\n\n

This is confirmed by recent\nupheavals in the global coal market linked to the escalation of the climate\ncrisis. This has left \u2018black-empowered\u2019 Exarro and the 91% black-owned Seriti\nsupplying 70% of Eskom\u2019s coal. Have the RETers declared this a principled\nvictory? No, they have revived the idea of nuclear instead because their\nclique <\/em><\/strong>still does not sufficiently have its fingers in the Eskom pie. <\/p>\n\n\n\n

<\/div>\n\n\n\n

IPPs<\/strong><\/p>\n\n\n\n

There is some excitement,\nespecially amongst the white middle class, that so-called \u2018Independent\u2019 Power\nProducers are the answer to the Eskom crisis. They dream that IPPs are the\nroute to transforming South Africa into a petty bourgeois utopia made in their own\nimage: a nation of self-sufficient small property owners. Others hope that IPPs\nare a magic bullet to resolve the climate crisis. But these fantasies have\nnothing to do with the reality of IPPs.<\/p>\n\n\n\n

The word \u201cindependent\u201d in IPPs is\na euphemism for what in reality is a private profit-making investment\nconsortium. The Renewable Energy Independent Producer Power Procurement Plan\n(REIPPPP) was introduced during the Zuma-administration. So called \u2018public-private\u2019\ndeals worth R194 billion were signed. Under Ramaphosa REIPPPP has continued leading\nto an additional R52 billion worth of deals.<\/p>\n\n\n\n

Ramaphosa has heralded a so-called\n\u201cgreen energy revolution\u201d in which he seeks to link IPPs to the expansion of renewable\nenergy. This is nothing more than an attempt to abuse the climate crisis as a\ncover for the privatisation of South Africa\u2019s electricity supply and the\ncreation of a new capitalist electricity market. Coal miner Exxaro\u2019s CEO,\nMxolisi Mgojo, explained that his company\u2019s recent expansion into renewables is\n\u201cbeing driven by a more-drastic-than-expected liberalisation of SA\u2019s energy\nmarket\u201d.[7]<\/a>\nHe let the cat out of the bag!<\/p>\n\n\n\n

The DA encourages the middle\nclass\u2019s fantasies about what IPPs represent in its campaign to \u201cfree South\nAfricans from Eskom\u201d.[8]<\/a>\nThey champion allowing \u201ccitizens to generate their own power\u201d. The DA proposes\ntax rebates for homeowners to install solar systems and the cancellation of VAT\non LED lightbulbs and energy-efficient appliances. But the real heart of the\nDA\u2019s campaign is to allow municipalities to buy electricity from IPPs. In 2017,\n42% of Eskom\u2019s power reached households and businesses via municipalities,\ngenerating revenues of R22.5 billion.[9]<\/a><\/p>\n\n\n\n

Just as the RETers under Zuma\neyed Eskom\u2019s R50 billion coal budget as ripe for plucking, the business\ninterests close to the DA are eyeing municipalities\u2019 R22.5 billion electricity revenue\nwith the same greed. Both want the money to flow where they are best positioned\nto profit from it.  Just as the RETers use\npolitical fronts to try and mobilise the black masses to support business\ninterests close to them, the DA is trying to mobilise the middle class to support\nbusiness interests they are close to.<\/p>\n\n\n\n

RETers like the EFF have\ncounter-posed nuclear to renewables, calling it the \u201cblack option\u201d. But there\nis nothing inherently \u2018anti-black\u2019 about IPPs, anymore than there is anything\ninherently \u2018anti-black\u2019 about coal. In fact, IPPs are required to have\nsignificant \u2018black\u2019 ownership \u2013 the historic compromise was built into IPPs\nfrom the start. The original REIPPPP envisaged IPPs owned and operated by a mixture\nof black industrialists (40%), community trusts, foreign shareholders and\n\u2018other\u2019 South African shareholders.[10]<\/a>\n<\/p>\n\n\n\n

The squabble around IPPs reflects\nthat at this stage, the RETers expect bigger returns from coal (and nuclear),\nand a section of DA-supporting businesses expect bigger returns from\nmunicipality-supplying IPPs. But there are no strictly demarked \u2018spheres of\ninfluence\u2019. They will all move to wherever the greatest opportunity for profit\nis.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Independent Programme<\/strong><\/p>\n\n\n\n

Even if Ramaphosa\u2019s anti-corruption\ndrive in Eskom is a complete success and the Zondo Commission claims some\nhigh-profile scalps, this will do little more than re-define the limits for the\nlegalised plunder of Eskom. The foundation of the capitalist class\u2019s parasiting\non the labour and taxes of the working and middle classes lies in the system of\ntenders, outsourcing and the private-ownership of the coal mines, road\ntransport, and the other industries that Eskom supports. No faction of the\ncapitalist class threatens these foundations; ultimately, they all want to\nstrengthen them.<\/p>\n\n\n\n

Any return to nuclear \u2013 an extremely\nunlikely prospect \u2013 would unleash a tender feeding-frenzy dwarfing that at\nMedupi and Kusile. The cuts to the public sector wage bill and department\nbudgets in the February budget are, in large part, to guarantee that Eskom\u2019s\nvast debt is paid back in full to its capitalist creditors, with profit. The\nCosatu leadership\u2019s aborted proposal for the Government Employees Pension Fund\nto take-over a majority of Eskom\u2019s debt was a proposal to guarantee just this.<\/p>\n\n\n\n

The looming \u2018unbundling\u2019 of Eskom\nis clear preparation for either the partial-privatisation of Eskom, or the\nadmission of IPPs under state supervision into a more expansive capitalist\nenergy market. Marxists always prefer state ownership to private ownership. But\nthe extent to which a nationalised industry, when run by a capitalist government\nin a capitalist economy, is any sort of genuine \u2018alternative\u2019 is extremely limited.\nCapitalist governments use state ownership to support, defend, and even boost, profits\nin the private sector. In keeping with this, any new energy market will almost\ncertainly position the state as a lender of last resort to bail out Eskom if investor\nfunds dry up. Under capitalism, SOEs are, notwithstanding recent bailouts, run\nas commercial entities with the government as \u2018shareholder\u2019. There is no\nco-ordination, let alone planning, between the SOEs. The ANC\u2019s model of state\nownership has nothing in common with real socialist nationalisation under workers\ncontrol and management.<\/p>\n\n\n\n

Burning coal contributes\nmassively to global warming and the unfolding climate crisis. Local communities\nnear coalfields are blighted by pollution from coal mining and road transport.\nIt is clear that South Africa must rapidly move away from coal. But the working\nclass must reject the idea that this can only be done via IPPs. The demand must\ninstead be for a massive publicly-owned renewable energy programme. This must\nbe under the democratic control of workers and communities and rolled-out in a\nway that not one single coal miner will lose once cent of income.<\/p>\n\n\n\n

The capitalist class\u2019s relentless\nprofit-seeking must be choked-off. This must be the aim of an independent working\nclass programme, at the heart of which must be the demand for the abolition of\ntenders and outsourcing in Eskom, the nationalisation of the coal mines and existing\nIPPs, opposition to dangerous nuclear power and new IPPs, and the rapid development\nof publicly-owned renewable energy to replace coal without the loss of a single\njob.<\/p>\n\n\n\n