Mcebisi Jonas backs unbundling of Eskom
Eskom, SA’s biggest state-owned enterprise, should be broken up into smaller entities, according to former deputy finance minister Mcebisi Jonas.
This comes in the midst of wage negotiations and strikes at the embattled power utility. Unions rejected a 4.7% wage offer last week.
Jonas is now a member of cellphone operator MTN’s board. Speaking to Business Day at the Drakensberg Inclusive Growth Forum recently, Jonas said: "It’s a huge state monopoly that’s highly inefficient and there is a case for unbundling."
This would entail splitting the embattled SOE into constituent businesses, he said.
"Stabilisation isn’t enough. The more difficult challenge is going to be actually effecting transformation by rethinking and remodelling SOEs," he said. This did not necessarily mean privatisation but rather a convergence between public investment and private investment into these entities.
"The debate is not about who owns them, the debate is about how they are managed and how to ensure that their operations are efficient and how do you ensure that they are effective in what they do," he said.
Citibank economist Gina Schoeman said the government was reluctant to talk about privatisation but agreed there was a case for unbundling Eskom.
She said credit ratings agencies were concerned about how Eskom’s balance sheet would be tackled. "There’s a consensus across the economy no matter who I speak to about privatisation. There’s an argument for breaking it up and selling off a part of it. It’s seemingly going to happen at some point," she said.
This comes as S&P Global Ratings MD for Africa Konrad Reuss said Eskom was high on its list of risks to SA. "The critical state-owned entity that is a risk for the market is Eskom," said Reuss, speaking at the Vision 2030 Summit at Emperors Palace last week.
"We didn’t see sufficient government support for Eskom in the context of persistent liquidity pressures. We have to see government support materialising in a way that the liquidity crisis is being dealt with in a sustainable way. Negative cash flow and a liquidity crisis are dragging Eskom down," he said.
On Friday, Finance Minister Nhlanhla Nene told the media that restructuring Eskom was "on top of the agenda" for SA.
"Beyond the discussions and the negotiations on the salaries, what is important is actually beginning to restructure Eskom," Nene said. "It is on top of our agenda to get Eskom on a sustainable platform."
He warned, however, that the "money does not exist" to satisfy the unions’ wage demands.
"What exists is the goodwill and political will also to have an honest, open, frank discussion how to best take this forward in the interest of SA."