Eskom continues to be the cornerstone for the South African economy. So it is imperative that the company succeeds if we are to grow this economy. The company generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers in South Africa, and to municipalities, who in turn redistributes electricity to businesses and households within their areas.

It also purchases electricity from independent power producers (IPPs) in terms of various agreement schemes as well as electricity generating facilities beyond the country’s borders. Eskom is one of the biggest utilities in the world with over 43 000 megawatts of installed generating capacity.

Chairperson I am merely reiterating what the committee may already know to emphasise the importance of this company that turned 90 years old last year.

Eskom is expanding its generation capacity in line with the President’s recognition of State Owned Enterprises and Development Finance Institutions becoming engines of development, complementing the State in promoting inclusive economic growth.

In this regard Eskom has successful completed the return-to-service programme, which includes Camden, Grootvlei and Komati power plants. Whilst this has added the much needed relief during the current constrained environment, it is not enough. More generating capacity is still required. 

Construction is progressing as part of the building program at Medupi, Kusile, Ingula Pump Storage, Sere Wind Farm sites. And Chairperson I am confident in Eskom delivering and synchronising the first unit at Medupi by December this year.

It is a well-known fact that Eskom has experienced a number of challenges in the recent years. I will not go through these challenges except to highlight that since taking up office in May, I have had several engagements with the Eskom Chairman and his team; firstly to get a deeper understanding of these challenges and secondly to engage on various options that can jointly lead us to a sustainable solution.

This has also led me to challenge the Eskom Board and management to focus particularly on the following in the short-to-medium term, amongst others, to: 

a) Establish a sustainable capital investment approach characterized by intelligent investment decisions, financial prudency and commercial sustainability to meet industry demands and customer expectations;
b) Implement cost containment measures and ensure financial sustainability of the Company in the context of the MYPD3 tariff decision;
c) Explore and urgently implement measures to improve performance of areas that have experienced significant challenges, in particular power stations; and
d) Drive regional integration, economic transformation, beneficiation, industrialization, aggressive job creation and the development of a supplier base that meets Broad-Based Black Economic Empowerment (B-BBEE) criteria.

The environment within which the company is operating is changing. Eskom needs to be more agile to adapt to this changing environment. I am convinced that the Energy Policy and Regulatory environment has also been characterised by uncertainties particularly in relation to energy security and the associated costs, future electricity planning and the anticipated end state of the industry.

These uncertainties have significantly contributed to the challenges the company faces in delivering on its mandate and continue to pose a risk to Eskom’s long term financial sustainability. In addition changes to emissions and air quality licenses continue to add to challenges in the company’s operating environment and its ability to deliver on its mandate in the long term.

In light of the above, you will be aware chairperson that the President has announced the members of the Energy Security Cabinet Sub-Committee that will look at these matters amongst other things. An intergovernmental task team comprising of my Department (DPE), Departments of Energy, and National Treasury have been working with Eskom and the Regulator to formulate a solution to the immediate challenges that Eskom is facing.

A draft report with options has been shared with us, and we are going to be receiving the final proposal soon after which we will take to this Cabinet subcommittee and Cabinet ideally before end of September.

I have also undertaken to treat the appointment of a permanent Eskom Chief Executive with urgency. This is why I intend taking this matter to Cabinet soon with a view to announce a new appointment latest by mid-August. Following this, I have urged the Board to move rapidly to fill all the other critical vacant executive positions to ensure the sustainability of the Company.

Chairperson, it is important that we all rally behind Eskom and give it the necessary support to be able to ensure security of electricity supply going forward. It is equally important that Eskom responds appropriately by moving to the next level. The sustainability of Eskom going forward depends on it; the country’s economic growth depends on it.