Vavi: South Africans Should Not Pay for Eskom’s Corruption

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JEREMY MAGGS: In South Africa, Eskom has become a symbol of failure and corruption. Once again, ordinary citizens are bearing the weight of the crisis. The state-owned utility seeks to raise tariffs while households and businesses struggle with a fragile economy. Why should citizens face the fallout from mismanagement, tender fraud, and widespread looting?

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

This concern has been highlighted by the South African Federation of Trade Unions [Saftu], whose general secretary, Zwelinzima Vavi, states that this is intolerable. Zweli, why do you believe citizens are disproportionately impacted by Eskom’s corruption? What is your central argument?

ZWELINZIMA VAVI: We are deeply disappointed and frustrated that those identified by the Zondo Commission as partly responsible for our current situation are the same individuals we are expected to call “honourable members” of Parliament. This is what drives us insane.

These very individuals are vocal about the crisis at hand. Over the past 16 to 17 years, we have seen a more than 500% increase in tariffs at Eskom—unprecedented, shifting the burden of the crisis from its creators to everyday people: small businesses, the unemployed, the marginalised, and even large corporations. The consequences are becoming unbearable.

Read: Major power users encourage Nersa to reassess Eskom tariff determination

Every day brings news of shutdowns or job losses, whether from large or small companies. Twelve thousand jobs have disappeared from South Africa’s smelters. ArcelorMittal South Africa is nearing collapse, while many companies claim they cannot maintain operations. The unsustainable costs imposed on firms due to Eskom’s failures are a driving force behind this crisis.

We are outraged by this situation.

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

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Local municipalities also impose their own charges—ranging from 10% to as high as 14%—leading to a combined increase of nearly 18% to 19%. This trend cannot persist.

JEREMY MAGGS: You speak of an unbearable burden, yet Eskom claims to have a debt relief strategy designed to protect consumers. I assume you disagree with that statement.

ZWELINZIMA VAVI: Absolutely. We firmly believe that the entire structure of Eskom has become untenable. It is unacceptable to expect citizens to finance corruption through exorbitant payments.

We argue that Eskom’s R400 billion debt stems from cost overruns and severe corruption evident at Medupi and Kusile, pushing us to pay billions to the World Bank.

That’s why we demand these amounts be recognized as odious debt, signifying that the World Bank was aware it was financing the corruption linked to Medupi and Kusile, which ultimately benefitted the ruling party through Chancellor House, facing international scrutiny but evading accountability here in South Africa.

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

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

JEREMY MAGGS: Ironically, do you now find yourself aligned with Business Leadership South Africa [BLSA]? Its CEO, Busisiwe Mavuso, claims that Eskom’s pricing structure shields the utility from cost discipline while penalizing consumers. She asserts that the solution lies in fostering a competitive electricity market. Do you concur?

ZWELINZIMA VAVI: She is correct on the first point but misguided on the second. Technically, we are in a competitive market. Eskom currently subsidizes 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 restricted from investing in renewables for a time, enabling IPPs to fill that gap and introduce competition.

Eskom’s balance sheet shows that the cost of this arrangement requires us to subsidize IPPs with R20 billion.

This is unjust as Eskom sells electricity to them at inflated prices.

We demand transparency regarding the contracts with these IPPs, insisting on public disclosure and a comprehensive parliamentary inquiry into why these agreements have remained hidden for so long.

JEREMY MAGGS: Can you comment on the extent of responsibility that should be directed at the National Energy Regulator of South Africa [Nersa]? They’ve had to adjust tariff increases due to errors. Do they hold any responsibility?

ZWELINZIMA VAVI: Yes, they do. This is an example of regulatory capture. They’ve acted passively, never questioning how sustainability is feasible when the utility requests annual tariff hikes of 20%, 25%, or even 30%.

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

Despite conducting public hearings, they have never drawn a line in the sand or demanded accountability from Eskom regarding its structure, sustainability, or efficiency. We should be inquiring about coal procurement—how much our local companies charge and why costs remain high when South Africa possesses vast coal reserves.

Nersa isn’t posing these crucial questions, and we are very concerned. This is how we define 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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