Eskom’s future dim after downgrade
Written by: Keneiloe Huma
There are tough times ahead for Power utility Eskom after being downgraded to junk status by credit rating agency Standard and Poor, the National Union of Mineworkers is now calling for the utility’s Chairperson Zola Tsotsi to be fired.
The ratings company lost confidence on the state alone’s credit rate of the utility after it suspended four of its senior officials including Tshediso Matona.
S&P downgraded Eskom to BB+; it says the negative outlook reflected the power utilities operating performance has not yet stabilized after rising costs.
The embattled utility could be facing more troubles as economists are now predicting that further downgrades from other credit ratings could be on the cards.
The junk status ratings are the worst the rating utility can get, especially as Eskom has been struggling to keep the lights on, in the country since last year December.
Junk status rating for Eskom means the company will find it difficult to be able to get funding and when they do, it will cost them more to pay the money because the interest will be high.
The company is not only cash strapped but is now faced with management problems. Tsotsi who is a non- executive member is being accused of interfering with operational responsibilities.
The National Union of Mine worker is calling on Public Enterprises Minister Lynne Brown to axe Tsotsi because they say he has brought the company into a financial crisis.
The unstable management at the company has resulted in consumers losing confidence on the utility which has been assuring the nation that there is no crisis.
Economists are now predicting that the further downgrades from other rating agencies could be on the cards for Eskom as this has created a negative outlook for the company.
Another problem adding to Eskom’s woes is the new electricity tariff increases which are expected by July this year. Eskom announced that it has asked the National Energy Regulator to reopen its multiyear price determination this financial year because of funding constraints.
Eskom says electricity tariffs will increase to 12.69% for direct customers and 14.25% for municipalities from July.
Opposition parties such as the Democratic Alliance and the Congress of the People have called for government to create opportunities for power producers in efforts to rule out the monopoly game.
I agree with DA and COPE because this would mean, we no longer rely on Eskom for power or electricity and it would give the aging utility time to recover and be able to bring their delayed Power Stations online.
The country has been waiting for the Medupi Power Station and the Kusile Coal fired power station to start adding electricity to the country, however more delays are expected.
Without a proper management team leading Eskom, I don’t foresee the troubles at Eskom being resolved now, unfortunately I don’t agree with Deputy President Cyril Ramaphosa who insists the problems will be addressed soon.
With the business community coming on board to help Eskom, it remains to be seen whether the utility will start to shape out or maybe we might be heading for a national blackout.