A few years before Anglo American turned 100, there was a question mark over whether the miner would reach this great old age due to the financial collapse that sparked the global recession of 2008.
With the prices of the commodities in its broad portfolio falling, the management of the company founded by Ernest Oppenheimer embarked on a forced sale of its assets. Vultures were plentiful, ready for a cheap play for the diversified giant, the latest of which was Indian billionaire Anil Agarwal. It was any bet if the company would make it to its 100-year birthday.
But the winds changed in his favor; commodity prices improved and a weak rand boosted the outlook for him. The strategy of selling its assets at only 16 operations was discarded. CEO Marc Cutifani’s management got a second wind and was able to set up a new strategy and fend off the vultures. Today, it’s a 106-year-old company and it may be another decade if the next global recession isn’t deeper than the one we experienced after the Covid pandemic. They dodged a bullet.
Next month, Eskom, a key player in South Africa’s industrialization and fueling the country’s fastest growing years after World War II, marks its centenary. It has come this far, despite the last 20 years during which aging power plants, indecisive political solutions, and corruption both internal and external have paralyzed the state entity.
While Anglo’s future was saved by the recovery of some of its main commodities, in Eskom’s case there are no market forces miraculously channeling it into safer waters. It is only through critical governance arrangements, proper care and maintenance, a funded expansion drive, and political certainty that it can get its second breadth. Without him, another decade seems like a journey too far for the energy company.
Without Eskom, and no matter how you feel about Megawatt Park’s parent company, we leave our entire electricity market in the clutches of the private sector. The rules are different for private players, because shareholder returns take precedence over everything else. It could be argued that we would need a stronger independent energy regulator in the South African National Energy Regulator (NERSA) to ensure that tariffs do not rise even faster than they have.
Nersa has proven susceptible to political pressure from the ruling ANC, the Democratic Alliance and the Economic Freedom Fighters by deliberating Eskom’s tariff requests for more than a decade, without taking into account the energy company’s maintenance costs. . A big part of why we’re here is Eskom’s revenue shortfall, despite the policy failures of recent years.
Imagine how much more susceptible Nersa would be to pressure from private players and the demands of its shareholders for a return on their investment. Take the case of the Independent Communications Authority of South Africa (Icasa) and how its integrity collapsed under pressure from mobile operators such as MTN, Vodacom and Naspers, the former owner of pay-TV operator DStv.
Icasa’s best and brightest regulators were poached and accepted government affairs-related positions at many of the companies they had previously been regulating. The institution has long been hollowed out, and the changing dynamics of the Internet age have left authority far behind. It won’t catch up any time soon.
What would make Nersa a big energy player or players without a functioning Eskom, whose mandate is to provide electricity efficiently and sustainably to all spheres of society? They would just undercut the regulator the way Icasa did: the lure of big wages is nearly impossible for any frugal state to counter.
This is just a concern about talk of an imminent end to Eskom due to our frustrations with the stage six load shedding. It’s hard not to jump on board and give up some of the good men and women still working at that failing power company, and legislators invested in their next 100 years.
Given South Africa’s development needs and our historical heritage, a fully privatized electricity grid scares me. Surely, our divisions would only grow.
The difference between Eskom and Anglo is that there are no market forces that would save the energy company and guarantee it for another 10 years. Its future is in the hands of policymakers, a strong new management team, an independent regulator not susceptible to political pressure and a multi-billion rand debt solution from its sole shareholder. Without these interventions, its future is as perilous as Anglo’s was after the 2008 global recession without the salvation of high commodity prices.
We are married to the Eskom problem, I’m afraid.
