Speech by Hon Dipuo Letsatsi-Dube, Chairperson of Portfolio Committee on Public Enteprise

27 November 2014

Debate: The escalating crises at Eskom (DA motion)

Contextualising the debate

Any debate needs theoretical grounding when addressing the problem statement and the challenges identified by the problem statement. It follows that solutions and recommendations to the perceived challenges must therefore reflect a scientific understanding of the role that State Owned Enterprises play in the Economy and what they are meant to do.

The paradigm of the debate is whether we are on course with Eskom in driving the strategic direction for economic transformation within the electricity sector informed by the role of Eskom as a driver and agent of economic restructuring in the sector.

The optimal alignment and co-ordination of mandates and operations of Eskom in the broader objectives of a developmental state is what must be addressed. The broader aim must be to restructure the economy in order to create decent job opportunities, improve the current disparities with respect to income distribution levels, enhance the quality of service delivery and address social justice concerns, in an all encompassing manner.

In this context Eskom was not created to maximise profits or incur losses, rather their existence is for the purpose of driving the development agenda. The dual mandate of Eskom is to achieve a balance between the required level of self-funding and undertaking developmental projects that the private sector would ordinarily not.

This means Eskom is tasked with costly development mandates that are strategically positioned to generate the revenues sufficient to cover the costs associated with executing its respective, mandate.

The link between country savings levels and the funding of development is central in this debate Emphasis needs to be placed on mobilising national savings (such as pension funds) in order to support the strategic and long-term investment programmes. Without this the Industrial Policy Action Plan will not succeed. Industry needs the large infrastructure programme and the funding of the state in the reindustrialisation of the economy and Eskom is central to this. This is the experience of a number of different countries and we should learn from best practice.

Eskom`s role in stimulating the manufacturing sector is critical.

What this debate must also reinforce and strengthen is the perspective that Eskom must be strengthen as powerful instrument of economic transformation, whilst addressing systems and operational contradictions and remain firmly within the control of the state in order to have the capacity that is capable of responding effectively and efficiently to the developmental agenda of government. The neo-liberal notion that selling of strategic state assets to the private sector is going to inherently make things better defies the empirical research in a number of countries (USA, Spain) where privatisation has proved to have resulted in poorer performance, deterioration of service delivery and disruption to industrial growth.

With regards Eskom ANC policy clearly guides what its mandate is which in summary is to: build the capacity of the state in order to pursue the objectives of a developmental state and to ensure that it remains financially viable and profitable. That their primary responsibility is to support and lead in strategic government-led developmental objectives within the realm of a clearly defined public mandate of pursuing an overarching industrialisation programme.

Both the New Growth Path and the National Development Plan give direct to Eskom. The New Growth Path consistent with the ANC resolutions positions Eskom a government commercial entity as a key player in driving economic growth. National Development Plan provides a diagnosis and makes proposals for the effectiveness of the institution.

Debunking the myths that the detractors of the ANC government desire.

There is a natural conflict between the commercial interests of Eskom and the states developmental interests. There is nothing contradictory in this as some would want us to believe and even where there are mixed results when assessed against the competing but equally prioritised objectives of economic and socio political objectives, it is important that as a government business enterprise the interests of the public are primary for the ANC government.

Taking forward the ANC`s electoral mandate

The renewed sense of urgency in transforming the lives of our people and changing the structure of the economy is central to the agenda of the ANC.

The mandate from the electorate is to implement radical socio-economic change. This means fundamentally changing the lives of poor and working people for the better, by rolling back unemployment, inequality and poverty. It calls for bold steps to place the economy on a qualitatively different path.

In order to drive inclusive growth, creation of employment opportunities and transformation of society, the most important immediate priority that must be addressed is energy, and achieving security of supply with an appropriate mix.

Resolving the electricity supply constraint is key the industry and the development of the manufacturing base, ensuring certainty for investment both domestic and international and implementing the state`s developmental objectives.

Any debate on Eskom raises the questions of the structure of the energy industry; appropriate regulatory and other measures. The reality is that these are being addressed all with the view to the priority of energy security. Eskom will continue to play a critical role in the future supply of energy, including in new energy-generation initiatives. The role of the private sector will be addressed in this context to ensure an appropriate mix.

Eskom remains central to improving the performance of the core productive sectors, including mining, manufacturing and agriculture. In mining, increased support by Eskom for exploration, development and production will be complemented by consolidated state ownership in the sector. Stronger efforts towards local beneficiation of mineral resources in a manner that builds a new competitive advantage based on our resource endowment will be complimented by Eskom.

The revival of the manufacturing sector is being supported by better use of industrial incentives from Eskom. These of course have to be effectively monitored and enforced in order to given the necessary support to the infrastructure build programme.

In conclusion

Eskom is confronted by a growing economy that is in need of ever more energy inputs. The need for investment in additional capacity to provide appropriate energy resources compels the exploration of various ways to secure the security of supply. Eskom will remain central to this and the ANC is committed to maximizing access to energy for all, especially the rural poor as a key part of its fight against poverty.

Energy self-sufficiency is essential for the economy to grow as well as sustained socio-economic well-being of the citizens in particular the poor and indigent. The promotion of self-sufficiency is a priority for the ANC.