Does Eskom need a R238 000 mop to clean up its act?

Is it just me or is anyone else more than a little dizzy from the eternal going-round-in-circles mode of doing business that Eskom seems hell-bent on clinging to?

It’s a scenario that, to many other countries, would appear bizarre at best, and downright embarrassing at worst.

This is how it works:

Eskom: Please use less electricity because internal corruption and years of mismanagement mean we can’t produce enough to keep all of the lights on all of the time.

South African consumers: OK, we’ll invest in alternative sources of energy because we clearly can’t rely on you to give us what we need.

Eskom: Nersa, please could you let us increase our prices yet again because South Africans aren’t using enough of our electricity, so we’re not earning enough revenue to pay our debts…

South African consumers:  🤯

Eskom must be one of the only businesses in the world that wants you to use less of its product and then whinges when you do.

It would be laughable if it wasn’t so darn tragic.

It’s difficult to decide which particular aspect of Eskom’s woeful business performance is the most responsible for the dire situation in which it continually seems to find itself.

A recent headline in the Daily Investor tells us where they think the problem lies:

“Big electricity price increases because Eskom paid R238 000 for a mop.”

The sad thing is, it’s not even a joke or exaggeration - Eskom employees happily approved paying R238,000 for a single mop and R80,000 for one set of knee guards – basic items that can be purchased in any retail outlet for around R200 and R55 respectively.

The article goes on to say, “Eskom wants to increase electricity prices by 36.15% to cover its rising costs. However, the costs are so high because of mismanagement, corruption, and a bloated workforce.”

Eskom’s attempt to justify its request for this staggering increase (which is many times higher than national inflation) is to “allow for an improvement in the financial sustainability of Eskom through the migration to cost-reflective prices,” Eskom said.

What does that even mean?

Unsurprisingly, the request has been met with derision and anger from most quarters. Respected energy analyst and EE Business Intelligence founder, Chris Yelland, is one of the people voicing his disgust.

“After price increases of two to five times the inflation rate for many years, how can Eskom apply for a 35% price increase seven times the inflation rate on 1 Apr 2025?” he asks. “Then on top of that massive increase, a further increase two to three times the inflation rate on 1 Apr 2026, and again on 1 Apr 2027?”

It’s a question we’re all asking.

Economist Thomas Sowell likens the situation to the way enterprises in the former Soviet Union used to run.

“They take everything they can get, regardless of how much they need, and they don’t worry about economising on materials,” he explains in his book, Basic Economics. “After all, nobody at the top knows exactly what the real requirements are, so squandering made sense.”

Eskom is an expert at this particular business model, with an over-stuffed workforce, blatant and pervasive wasting of resources, rampant corruption, and woeful mismanagement making significant increases to its costs.

All of which serves to highlight the key issue: Eskom is not losing money because it’s not charging enough for the electricity it produces. It’s losing money because of inefficient practices, corruption, gross incompetency, and theft.

This is why increasing its prices is not the answer. If it were, then it wouldn’t have recorded massive losses over the past 15 years despite huge and regular tariff increases and several eye-watering government bailouts during that time.

Clearly, funding is NOT the problem.

As it always does when accusations are thrown at it, Eskom is making the right noises.

Its new management and board, headed by Chairman Mteto Nyati, says they are prioritising containing costs and rooting out the bad guys.

Chief executive Dan Marokane has been asked by the Eskom Board to benchmark the company against international power utilities to compare efficiency levels and see whether it does indeed have too many employees.

It promises to be a painful process.

Chief Financial Officer Calib Cassim said recently in a statement, “[The request for tariff increases] is a critical component in ensuring Eskom continues to provide reliable electricity services while improving its financial sustainability.

“Cost savings alone will not be sufficient to improve our financial health. The only way to achieve financial sustainability is to improve operating cash flows that result in positive free cash flows, with a strong focus on moving to a prudent, cost-reflective tariff.”

Anyone else feeling a distinct sense of déjà vu?

Or perhaps, as I saw in a meme the other day, déjà poo – a definite sense that we’ve heard this crap before.

It’s no wonder that thousands of South Africans, and many businesses, are making arrangements to become independent of Eskom.

Continual, huge price increases make alternative energy solutions such as solar PV with battery backups increasingly attractive and financially viable.

Independent energy expert Mohammed Madhi believes Eskom is shooting itself in the foot – especially as renewable electricity prices decrease year-on-year.

“We have already reached the point where renewable electricity prices are cheaper than Eskom’s rates,” he said.

Xanthea Limberg, Cape Town’s mayoral committee member for energy, agrees. “If Eskom continues with its price increases, nobody will need its baseload electricity eighteen months from now,” he said.

So, is the writing finally on the wall for our once proud electricity utility? Is it circling the drain, having effectively priced and mismanaged itself out of the market?

Mteto Nyati doesn’t think so, defiantly maintaining that companies are not moving away from Eskom.  

“People may wish it is the case,” he said. “However, the reality is that most businesses expect base load power to come from Eskom.”

He added that many companies are reviewing their planned energy investments dues to increasingly limited funds and a challenging economic environment. He remains confident that if Eskom can reliably supply electricity to them, they will reconsider their investment in renewable energy projects.

The big word there, of course, is IF.

Can Eskom get to a point where it can reliably, consistently and cost-effectively supply electricity to our countries businesses and homes?

I’m not convinced, and neither, it would appear, are thousands of other South Africans.

Consumer spending on solar imports tripled last year, thanks largely, perhaps, to the tax framework introduced by our finance minister for the 2023/2024 tax year, incentivising individuals to install solar panels at home to reduce dependence on Eskom.

At the end of that day, as was so neatly summed up in a recent article in Engineering News by Mark Allewell and Ross Mains-Sheard, South Africans are tired of waiting for Eskom to do its job properly. They are increasingly angered by consistently having to pay more for a service that delivers less and less.

“South Africans, and society at large don’t care whether [initiatives] are driven by the public or private sector,” they wrote. “The desired outcome remains the same: an end to energy insecurity, a lower ecological footprint, respite from inflation in household energy costs, and some relief from ongoing increases in the standard of living.”

Amen to that.