State officials in South Africa have begun preparations for the restructuring of the national utility Eskom, Reuters reports. The restructuring of the electricity concern is seen as a first step towards eventual privatization of the $9.9 billion company.
Economists expect the government to sell off parts of Eskom to raise money for other national projects. However this plan is handicapped by the fact that the utility is not technically owned by the state.
Since 1961, Eskom has been effectively run by official committee, and since 1985 by a body called the Electricity Council. Parliament has begun a series of public hearings on the Eskom Amendment Bill to define ownership of the company and transform it into a tax and dividend-paying corporate entity.
Revenue last year totalled $4.1 billion and debts were around $300 million. Currently, Eskom does not pay tax. The company is run on commercial lines but it has a social role too, using income from some users to subsidise power to others. The future of this role must be determined too.
The government is also believed to want to end Eskom’s monopoly in the electricity sector, eventually introducing competition through partial privatization. Analysts believe the government is reluctant to sell generating capacity but may be considering the privatization of the distribution arm as well as the sale of non-profitable assets.
However there is opposition to the restructuring of the utility. Eskom has surplus generating capacity and has been highly successful in delivering power to the nation’s townships and communities. If the company is privatized, some argue, it will raise tariffs and slow the electrification programme.
Since the African National Congress came to power in 1994, Eskom has consistently exceeded its target of 300 000 new connections every year. Critics of privatization fear this programme could be endangered.
