Splitting South Africa’s Eskom Could Take 4 Years

JOHANNESBURG – The legal separation of South African state power firm Eskom into three business units could take four years in total, the company said in an internal presentation seen by Reuters.

Eskom’s chairman Jabu Mabuza gestures during the 2018/19 interim results at the Eskom’s head office at Megawatt Park, in Sunninghill, South Africa, November 28, 2018. REUTERS/Siphiwe Sibeko/File Photo

South African President Cyril Ramaphosa promised to split Eskom into different units for generation, transmission and distribution earlier this year, as part of steps to make the struggling power utility more efficient.

Eskom, which supplies more than 90% of South Africa’s power, is reliant on state bailouts to survive and made a mammoth 20.7 billion rand ($1.4 billion) loss in the most recent financial year.

The presentation also said a proposal to hive off Eskom’s transmission unit into a separate state-owned company could take up to five years.


It is not clear whether those timelines have been approved by Eskom’s board or the government.

An Eskom spokeswoman confirmed that the company’s “executive forum” met on Aug. 22 and said Eskom was meeting stakeholders on its turnaround plan. She said aspects of that plan could change, depending on those meetings.

Fixing Eskom is one of the biggest challenges faced by Ramaphosa, whose economic reform drive has been jeopardised by load-shedding (power outages) that has dented growth this year.

The root causes of Eskom’s financial woes lie partly in a steep run-up in its salary, fuel and debt-servicing costs over the past decade. But its financial performance has also been hurt by corruption and repeated tariff awards by the country’s energy regulator that are below what Eskom says it needs to recoup its costs.

Separately, Eskom said in a statement that it had met labour unions on Friday and would hold further meetings to strengthen relations.

Striking workers forced Eskom into power cuts last year during fraught wage negotiations. Some unions have said they are opposed to the plan to split Eskom because they think it will lead to job losses.

(Reporting by Alexander Winning; editing by David Evans and Emelia Sithole-Matarise)