Fixing Eskom is a chance to switch course on climate change, says FirstRand chair
Restructuring the utility can help lead a transition from coal
The fingerprints of SA’s power utility are all over the economy’s demise. But fixing Eskom is giving President Cyril Ramaphosa a chance to switch course on issues from climate change to growth.
“It’s really important to link Eskom’s restructuring to where we want to be as a country,” said Roger Jardine, the chair of FirstRand, Africa’s largest bank by market value. “It has to happen as soon as possible.”
The utility has lost its 10th CEO in as many years, relies on bailouts to fund operations and interest payments, and cannot keep ageing coal plants running, contributing to the biggest economic contraction in a decade in the first quarter. Despite Eskom having too many workers, labour unions oppose Ramaphosa’s plan to split the company into three, while no visible progress has been made on reorganising its liabilities.
“Dealing with that debt has to be accompanied by a strong operational plan,” Jardine said, adding that restructuring the utility can also help lead a transition from coal, which provides about 90% of SA’s power.
One of the world’s most successful renewable power programmes, which drew more than R200bn in investments since starting in 2011, stalled for about three years as former president Jacob Zuma and former Eskom officials pushed for nuclear energy before his 2018 ousting.
Revitalising the push away from coal is an opportunity “to reset the clock” and attract private investors to help increase electricity capacity, Jardine said.
Globally, banks are under pressure over climate change funding, with Standard Bank shareholders voting in favour of a proposal for Africa’s biggest lender by assets to disclose its coal financing policies.
“We have coal in our lending portfolio and over time we will look at how we divest from that,” said Jardine, whose company owns investment bank Rand Merchant Bank and consumer lender First National Bank.
Nedbank Group has said it will no longer fund new coal-fired power plants, which led to remarks from ANC economic policy head Enoch Godongwana that banks may be forced to lend to the industry.
“For anyone to say ‘if banks won’t fund coal we will force them to’ is not sensible,” Jardine said. “For anyone to say ‘we won’t fund coal tomorrow’ is also not sensible because there is a whole ecosystem here that has to be carefully migrated.”
The Absa Group aims to develop a policy on coal funding by researching the 12 African markets it operates in, said chair Wendy Lucas-Bull. “Each country is in a different stage of dealing with it,” she said, “and it will have different implications in terms of development.”