Founder: Turnaround Talk
In November 2021, Turnaround Talk published an article which asked if Eskom was any closer to being placed into business rescue or if the company was in fact a candidate for business rescue. Engagements with turnaround professionals regarding this issue pointed out that Eskom was not in fact not a prime candidate for business rescue; rather, the utility would need to go through an extensive business turnaround plan based off the division of Eskom into three separate business units. Again, this has been delayed by Governments reluctance to take the bold step to enact this.
Finding a solution for the energy crisis is becoming very important with opposition parties saying that South Africa’s democracy is in jeopardy if we don’t reach a resolution soon. Comparisons to the fall of Zimbabwe are never far from some political commentator’s lips.
The Eskom business rescue option has been raised once again, this time by Dawie Roodt who is one of South Africa’s top economists.
Mismanagement
Talking to IOL, Roodt said that mismanagement of the power supply monopoly was likely to lead to privatisation.
He claimed the creation of a business rescue plan now would enable Eskom to ensure consistent electricity provision again.
“Put the thing [Eskom] under business rescue, realise that this is a crisis, and see what we can do. That will probably include firing a lot of people, selling off what we can, get private sector participation.
“That is the only solution I see at the moment.”
Photo By: Dawie Roodt
Political interference
Roodt added that political interference could further cripple Eskom.
The IOL article points out that former board members previously hit out at politicians for preventing executives from taking decisions to prevent the collapse.
Critics agreed that the power utility’s turnaround strategy had been stymied by political considerations.
Roodt warned the decision to move Eskom from the Department of Public Enterprises to the Department of Mineral Resources and Energy could make matters worse.
“There’s a lot of political play behind the scenes as well.
“In principle, there’s nothing wrong moving Eskom to the Department of Energy, but I’m afraid I think there are perhaps a lot of political reasons behind these curtains that we are not aware about.”
Industries in crisis
Loadshedding is becoming a challenge for many industries and could be a root cause of financial distress if not managed properly.
One of the industries that is facing major challenges is the poultry industry. Izaak Breytenbach, general manager of the South African Poultry Association, told News24 that as it is, its members have had to cull more than 10 million day-old chicks in the past six weeks due to escalating load shedding. The agricultural association is one of SA’s oldest, dating back to 1904, and has over 100 members.
Breytenbach said that when there was Stage 6 load shedding, for instance, producers lose “six hours of slaughter” which they cannot catch up again because they slaughter 24 hours a day. Ordinarily about three million birds are slaughtered per day.
“One can actually say there is no shortage of chickens. The chickens are standing on the farm and we can’t get them through the slaughter process to get them to the restaurants and to get them to the retail. So that is really the issue we have,” said Breytenbach.
Breytenbach said the association was also concerned about the effect load shedding could have on pricing, saying the power outages were costing the industry about 75c per kilogram of chicken produced. The average price for the first seven months of 2022 was R28.78/kg, 9.9% higher than the same period in 2021, according to the association’s latest bulletin.
Fresh produce is one of South Africa’s biggest exports and is therefore an important economic driver. However, there are concerns about the impact of continued loadshedding on the agriculture industry.
Agri SA CEO Christo van der Rheede said that rising interest rates and other costs were adding to their concerns.
“Given that particular context, farmers now have to contend with load shedding, which really puts them under severe pressure, which makes agriculture a very uncomfortable business,” Van der Rheede said.
Photo By: Supplied
Where is the end of the line?
The concerns about the impact of loadshedding are very valid. In mid-2022, President Cyril Ramaphosa said that future economic development in South Africa needs to be driven by privately owned companies as well as the State. This was seemingly a statement of intent that the role of independent power producers in South Africa will increase. Finance Minister, Enoch Godongwana told the recent meeting of the World Economic Forum that loadshedding will be a thing of the past in 12 to 18 months time.
But is Government going to be true to its word, or are these politicians playing to the crowd because they realise that they are losing support in key areas within the South African public? Are they also painting a picture of a Government of action so that they can increase investment?
If the ANC is serious about eradicating loadshedding, what immediate measures are they putting in place beyond talking a good game?
