A few years before Anglo American reached its centenary, there were question marks over whether the miners would reach this old age due to the financial crash that led to the 2008 global recession.
With commodity prices in the portfolio collapsing, management at the company founded by Ernest Oppenheimer began selling assets. Vultures were abundant, ready to play cheap for exciting giants, the last of which is the Indian billionaire Anil Agarwal. Any bet that the company will reach its 100-year anniversary.
But the wind changed in favor; Commodity prices are good and the rand greatly boosts its prospects. The strategy of selling assets so that only 16 operations are canceled. The management under the chief executive Marc Cutifani got a second wind and was able to organize a new strategy and get rid of the vultures. Today, the company is 106 years old and may make another decade if the next global recession is not deeper than the one experienced after the Covid pandemic. They dodged the bullet.
Next month, Eskom, a key cog in South Africa’s industrialization and the powerhouse of the country’s strongest growth years after World War II, turns centenary. It has come to this, even 20 years ago when aging power plants, unclear policy solutions and internal and external corruption have crippled the state-owned entity.
While Anglo’s future is saved by the recovery in some major commodities, in the case of Eskom there is no market force that will miraculously drain into safer water. Only through critical government corrections, proper care and maintenance, a well-funded expansion drive and policy certainty can a double width be achieved. Without it, another decade seems a long way off for electric utilities.
Without Eskom, and no matter how you feel about the Megawatt Park headquarters company, we leave the entire electricity market in the hands of the private sector. The rules are different for private players, as shareholder returns are more important than anything else. One could argue that we need a stronger independent energy regulator in South Africa’s National Energy Regulator (Nersa) to ensure rates don’t rise faster than they have.
Nersa has proven vulnerable to political pressure from the ruling ANC, the Democratic Alliance and the Economic Freedom Fighters when considering Eskom’s tariff demands for more than a decade, ignoring utility maintenance costs. A big part of why we are here is Eskom’s lack of revenue, not to mention the policy failures of last year.
Imagine how Nersa is more vulnerable to pressure from private players and demands from shareholders for return on investment. Look at the case of the Independent Communications Authority of South Africa (Icasa) and how its integrity has come under pressure from mobile operators such as MTN, Vodacom and Naspers, the one-time owner of pay TV operator DStv.
Icasa’s best and brightest regulators were arrested and took on government affairs-related projects at many of the companies they had previously regulated. Those institutions have long since been abolished and the changing dynamics of the internet age have left their authority intact. There will be no more rush.
What will the big energy player or players do to Nersa without a functional Eskom, whose job it is to provide electricity efficiently and sustainably to all sections of society? They will only undermine regulators like Icasa – the lure of big salaries is almost impossible for a frugal country to handle.
This is just one concern about the talk about the end of Eskom because of our frustration with the sixth phase of load shedding. It’s hard not to jump on the boat and give up on the few men and women who still work at these ailing power companies, and the policy makers investing in them for the next 100 years.
Given South Africa’s developmental needs and our historical legacy, the privatized power grid is feared. Of course, our division will only grow.
The difference between Eskom and Anglo is that no market forces will save the electricity utility and guarantee another 10 years. Its future is in the hands of policy makers, a strong new management team, an independent regulator not susceptible to political pressure and a multi-billion rand debt solution from a single shareholder. Without such intervention, its future would be as precarious as Anglo’s once was after the 2008 global recession without the safety of high commodity prices.
We are married to the Eskom problem, I’m afraid.