SONA2019: Eskom to be separated into three units, says Ramaphosa

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PARLIAMENT, February 7 – President Cyril Ramaphosa announced on Thursday that troubled state-owned power utility Eskom would be divided into three different units in a bid to manage its balance sheet.

Eskom is expected to post a R20.1 billion loss for the financial year to end in March from the R15 billion forecast at its mid-year results as overall expenses widened during the period. The power utility also has a mounting debt which stands at over R400 billion.

Delivering his second State of the Nation Address (Sona) in Parliament, Ramaphosa said that Eskom would need to develop a new business model to ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years’ time.

“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities –Generation, Transmission and Distribution – under Eskom Holdings,” Ramaphosa said.

“This will ensure that we isolate costs and give responsibility to each appropriate entity. This will also enable Eskom to be able to raise funding for its various operations much more easily from funders and the market.

“It is imperative that we undertake these measures without delay to stabilise Eskom’s finances, ensure the security of electricity supply and establish the basis for long-term sustainability.”

Ramaphosa said that Eskom’s new business model should take into account the root causes of its current crisis and also manage an independent state-owned transmission grid combined with the systems operator and power planning, procurement and buying functions.

The separation of Eskom units was not unexpected after the Presidential SOE Council – which Ramaphosa appointed to provide political oversight and strategic management of state-owned companies – reportedly recommended that the power utility be unbundled.

Earlier in the week, Ramaphosa told delegates at the Mining Indaba that government would not allow Eskom to fail because it was too big a factor and too important in the country’s economy.

– African News Agency (ANA)