JABULANI SIKHAKHANE: Publication of Treasury report on Eskom handled badly

Eskom and its failure to generate reliable electricity in sufficient quantities to fulfil the country’s needs is the single largest risk to government finances and the economy. That’s why there was no protest when finance minister Enoch Godongwana announced in 2023 that the government would pump an additional R254bn into the utility to stabilise its finances and buy it some breathing space to improve maintenance as well as invest in transmission and distribution infrastructure. 

So, it came as a surprise when the National Treasury published an independent assessment of Eskom’s coal-fired power stations last Thursday without any context or full explanation. The assessment was one of the conditions for the R254bn injection, which when completed would take total government financial support for Eskom to more than R460bn since 2008/09. 

The way the Treasury published the independent assessment was akin to a rap artist dropping a mic onstage and walking off. “It is hoped the findings and recommendations will assist in strengthening Eskom’s corporate plan and continued support [for] the turnaround at Eskom,” the Treasury said. The “hope” part is worrisome — as the custodian of public funds, the Treasury can’t “hope” that Eskom will use the technical assessment. 

This is bad because, as explained above, the shortage of reliable energy is the single biggest crisis facing SA. It has reduced the country’s potential growth rate by several percentage points. According to the Treasury, more than a third of the decline in SA’s growth since 2010 is explained “by the direct effects of reduced productivity from public utilities”. 

“This means that SA missed out on an aggregate of around R2-trillion in economic activity between 2010 and 2019 solely because of the weakening performance of Eskom and Transnet, a figure that will have increased significantly since then,” the Treasury said in its macroeconomic policy “A Review of Trends and Choices”, published together with the 2024 budget. 

This means the government missed out on a tax share of that economic activity, and the unemployed on potential jobs. But the cost of the shortage of reliable energy is far wider. It has also raised the cost of doing business as firms have had to make alternative arrangements to keep their operations running during power cuts. Those costs have been added to final prices paid by customers, adding to their cost of living bills as they seek energy alternatives or write off spoiled groceries during extended power cuts. 

Anything relating to Eskom, its past, current and future performance, must be communicated with that backdrop in mind. The government and Eskom must not leave any gaps in their communication. SA has an energy crisis, and during a crisis of this magnitude communication by the government — the Treasury, Eskom, the electricity ministry and the department of energy — cannot be this flippant. 

Given that the report was published almost a year after the assessment started, as well as the fact that Eskom had been given a copy of the report before its publication, the Treasury should have communicated better on where Eskom is in terms of meeting the conditions of the cash injection, specifically those that talk to, or are informed by, the technical assessment. 

Alternatively, Eskom should have issued a media statement at the same time as the Treasury was releasing the report. Eskom responded a day later, a Saturday afternoon nogal, to say it welcomed the technical assessment and the utility had already responded to the report’s findings “outlining many of the improvements already made” since March-May 2023 — the period during which the assessment was done.

Eskom also said between the period the assessment was done and when Eskom received the report, the utility had sorted out the design-related problems at Medupi and Kusile. The problem is that Eskom’s explanations came after the media had started reporting on the findings, a development that could easily have been avoided had the technical assessment and Eskom’s response to it been published simultaneously. 

There can be no justification for why Eskom issued its media statement a day after the Treasury’s publication of the assessment, especially because the utility had been given a copy of the assessment in 2023 and had responded to its findings. Unless, of course, the Treasury didn’t tell Eskom and other relevant government departments that it was planning to publish the technical assessment. 

Whatever the reasons for the poor handling of the report, this is yet another saga that reflects badly on President Cyril Ramaphosa’s administration. 

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.