How The Capture Of Eskom Hits Workers’ Pockets

Arguably, this is the price of capture, both small and large, which gripped the power company as the Gupta family made it the epicentre of its project.
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A woman carries fire wood on her head as she walks below state power utility ESKOM's elecricity pylons in Soweto, South Africa, August 8, 2016. Picture taken August 8, 2016. REUTERS/Siphiwe Sibeko/File Photo
Siphiwe Sibeko / Reuters

Public Enterprises minister Pravin Gordhan took Eskom's offer of a wage freeze off the table on Friday as the national grid was repeatedly threatened by angry workers who allegedly obstructed coal stocks getting into power plants and sabotaged sub-stations.

But the jury's out on whether Eskom can afford even an inflation-based increase as the cost of state capture of the electricity utility hits home. Eskom has been left virtually bankrupt. If it were not for state guarantees, Eskom would not be a going concern. Arguably, this is the price of capture, both small and large, which gripped the power company as the Gupta family made it the epicentre of its project.

The family's patriarch, Ajay Gupta, reportedly studied where the biggest revenue streams were in the state-owned companies and pin-pointed coal supply contracts as the most lucrative. The company strong-armed the global commodities trader, Glencore, to buy Optimum mine and then traded as Tegeta.

Eskom, then run by Brian Molefe and chief financial officer Anoj Singh, extended a soft loan to the Guptas to buy Tegeta by pre-paying on coal contracts. Before then, the former acting CEO Collin Matjila signed huge contracts to sponsor New Age breakfasts when the utility could not afford it. The New Age was the company's daily newspaper which earned revenue almost solely from its breakfasts bank-rolled by various state-owned companies.

In addition, news reports revealed how another acting CEO Matshela Koko had granted multi-million contracts to a company part-owned by his newly graduated daughter. All these instances of cronyism hit Eskom's balance sheet as it racked up debt and became more indebted to the state for bail-outs and loan guarantees.

Eskom's finances now imperil the country's finance and workers have rebelled against a mooted wage freeze put on the table by new CEO Phakamani Hadebe. In a week of protests, workers have said they will not pay the price of capture, of high executive salaries and of the costs of an independent power purchase agreement signed by the Minister of Energy Jeff Radebe.

The IPP agreements are meant to reduce South Africa's dependence on coal through funding of renewable energy plants which have high initial input costs and which create minimal jobs.

Eskom has faced three probes related to corruption and capture in three years: these include the Dentons (a law firm) report of 2015; the State of Capture report by former Public Protector Thuli Madonsela in 2016 and two Treasury reports of 2016 and 2017, largely into Tegeta. The total value of contracts probed in the three inquiries is estimated to be R3.9 billion, R10.3 billion and R424 million, according to Eskom's 2017 annual report.

Both the State of Capture report and the leaks of emails belonging to the Gupta family have revealed that Molefe and Singh developed close relationships with the Gupta family. Singh benefited from largesse including a trip for him and mistress to enjoy a luxury weekend at Dubai's Oberoi hotel.

Eskom has said it will reduce staff from 48 000 to 38000 by 2022.