Mon, 01 Jun 2020

Deputy President David Mabuza agreed with members of Parliament that Eskom should not pay arbitrarily high prices for coal if the beleaguered power utility is to recover from its years of financial strife.

Mabuza was replying to questions in the National Council of Provinces on Thursday afternoon.

His reply comes a week after the release of a special paper on Eskom by Minister of Public Enterprises Pravin Gordhan and Minister of Finance Tito Mboweni's mini-budget. Both ministers stressed the importance of Eskom receiving value for its money when buying coal from suppliers for its power stations.

The "Eskom roadmap" said the competitive advantage South Africa's cheap coal had in attracting industry, was being lost because of rising electricity prices, driven by coal costs and the Eskom build programme.

In response to the original question from African National Congress MP Anele Gxoyiya, Mabuza said many of the challenges South Africa currently faced in growing its economy and attracting investment had their roots Eskom's woes.

"We acknowledge our country is experiencing enormous energy challenges, which might undermine investment and growth. We have mechanisms to ensure Eskom honours its commitments," said Mabuza.

Eskom owed over R600m in back payments from neighbouring countries

NCOP member for the EFF S'lindile Luthuli asked Mabuza if he believed it was right that Eskom at times paid double the amount per tonne on coal than that which the National Energy Regulator of South Africa allows.

Mabuza said, if Eskom's current coal supply contracts exposed the company to overpaying, poor quality coal and lack of delivery, those deals warranted a second look.

"That is an agreement between Eskom and suppliers. Whatever led to the agreement to unfold the way that it did, those rates are not sustainable. Work is being done to renegotiate those contracts and to ensure better costs for Eskom," Mabuza said.

Last week Gordhan said Eskom was aiming to have completed the unbundling of its generation, transmission and distribution operations by December 2022. He also said Eskom would be reviewing coal contracts, while government meets with suppliers to review the cost structure.

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