Contact l Sitemap

home industries issues reasearch weblog press

Home  » Campaigns » Past Campaigns » Alliance for a Corporate-Free UN

ESKOM: Corporate Powerhouse or Green Company?

South Africa's Mammoth Electric Company Leads the Way in Utility Privatisation While Touting Sustainable Development
by Brian AsheEarthLife Africa eThekwini
August 16th, 2002

Photo: William Matlala. Eskom protest
Eskom workers protest privatization. William Matlala

Eskom, Africa's largest electric company -- also a major coal and nuclear enterprise, will be South Africa's Corporate Environmentalism Exhibit #1 during the Johannesburg World Summit on Sustainable Development (WSSD) in August and September. Eskom has already joined the world's elite greenwash companies with its rhetoric, presence in Business Action for Sustainable Development and its embrace of the Global Compact. In this article, EarthLife Africa looks at the reality, and finds that the company has behaved in ways that contrast with Global Compact Principles seven (support a precautionary approach to environmental challenges) and nine (encourage the development and diffusion of environmentally friendly technologies.)

RELATED ARTICLES

 

Last year the South African national power utility, Eskom, received the Power Company of the Year title at the Financial Times Global Energy Awards ceremony in New York. The award was presented in recognition of Eskom's success in "providing the world's lowest-cost electricity while at the same time making superior technological innovations, increasing transmission system reliability and developing economical, efficient and safe methods for combustion of low-grade coal."1

Eskom is the African continent's largest energy utility. The company is ranked within the top five global energy utilities and is the primary source of greenhouse gas emissions in South Africa. Despite the accolades awarded by the Financial Times, Eskom has become a growing target of dissent drawing the ire of community groups, trade unions and environmentalists fighting utility privatisation.2

Eskom's 2001 Annual Report, 'Embracing Sustainable Development' paints a one sided picture of the development footprint of one of Africa's most influential indigenous multi-national corporations. The corporate powerhouse should come under careful scrutiny for its claim to implement sustainable development. Its financing for the Johannesburg World Summit on Sustainable Development3 and the role played by Eskom CEO Reueal Khoza as the Vice Chair of South Africa's Business Coordinating Forum4 which works closely with the newly formed Business Action for Sustainable Development, also warrant serious investigation.5

This article presents some of the often-overlooked impacts of Eskom economic priorities on the social and environmental conditions of South Africa. It concludes with a list of demands to assist the South African power utility in moving beyond compliance with the nine principles outlined in the United Nations Secretary General Global Compact6 initiative to true socially and environmentally sustainable development.

Company Profile

Eskom generates over half the electricity produced in the whole of Africa and aims to extend its transmission grid into neighbouring sub-Saharan countries. With a generating capacity of over 40,000 megawatts, it is one of the largest utilities in the world. Eskom's vision is to " provide the world lowest cost electricity for growth and prosperity."7

Currently, Eskom produces 90% of the South Africa's electricity generated for resale and is the monopoly domestic public power utility. Eskom also owns and operates the national transmission system, a power line network measuring over 316,634 kilometres which transports electricity throughout South and Southern Africa. It sells energy directly to some 6,000 industrial, 18,000 commercial, 70,000 agricultural and 2.5 million residential customers.8

In addition, Eskom operates 13 coal-fired power stations, a 1,930-megawatt nuclear power station, two gas turbine facilities, two conventional hydroelectric plants, and two pumped-storage stations in the Drakensberg and the Western Cape.

Coal is King

Coal is the major fuel source used by Eskom, and will remain so for the foreseeable future.9 In 2001, Eskom used 94.14 million tons of coal. Eskom receives its coal at rock bottom prices because the high volume of supply contracts awarded to coal companies allows them to sell non-export quality coal cheaply. Eskom has standard industrial tariff agreements with a host of different companies throughout South Africa. It also has commodity-linked pricing agreements to supply electricity to the aluminium, ferrochrome and other energy intensive industries.

Due to large and relatively easily recoverable coal reserves and lax environmental regulation, the cost of South Africa's electricity is of the lowest in the world. However, by 1990, due to its programme to increase capacity, Eskom had a foreign debt of 7.4 billion rands, about 45% of total pubic sector foreign debt and 16% of South Africa total foreign debt (Horwitz, 1994).10


"The policy of cutting those who cannot afford their bills was especially unfortunate, because virtually all black South Africans were denied Eskom's services under apartheid."

--Patrick Bond

Thus the cost of government plans to provide abundant cheap electricity to stimulate economic development and investment has been borne by all South Africans. As Jubilee 2000 South Africa observes with justifiable bitterness, more than half of the World Bank's $200+ million in apartheid credits from 1951-66 were for Eskom's expansion, including coal-powered stations. But none of the benefits found their way to the homes of the majority of citizens (Bond 1999).

While abundant sources of cheap energy represent an important comparative advantage for South African industries, this low cost is attributable, at least partly, to the lenience of environmental regulations. Furthermore the low price of energy provides users with little incentive not to overconsume. The heavy reliance on coal for the country's energy means that the environmental impacts are generally more severe than they would have been if the economy were based on other energy sources. 11 The availability of cheap coal also provides little incentive for developing alternative power sources nor encourages conservation.

Nuclear Power

In the UN Global Compact the Secretary General asked world business to support a precautionary approach to environmental challenges (Principle seven) and encourage the development and diffusion of environmentally friendly technologies (Principle nine).

However, in violation of these principles, Eskom continues its intensive efforts to develop a South African nuclear Pebble Bed Modular Reactor (PBMR) - a mini-reactor, which is being hailed by the company as the safest, cleanest, and most cost efficient nuclear power source. Eskom has attempted to cast the reactor as a global climate saviour, exploiting concerns over global warming by misrepresenting itself as a carbon-free electricity source and least cost carbon mitigation option.

Anti-reactor sentiment is growing, with support from the National Union of Mineworkers and other major South African unions, Southern African Development Corporation and International organisations.12 However, Eskom continues to spend public money - over 450 million rands since 1993- to develop a new generation of nuclear power plants.13 The money being gambled on nuclear power comes entirely from of South African taxpayers and electricity consumers. It siphons off resources from other priority areas such as bringing power to all urban and rural communities and cleaning up emissions from the coal-fired plants.

Despite growing public opposition, Eskom hopes to obtain South African government approval for the project.

Utility Privatisation

The South African government is in the process of finalising a blueprint to restructure and partially privatise South Africa's 21 billion rand power sector. Public Enterprises Minister Jeff Radebe has stated that 10% of Eskom generation will be sold to a national company by next year and foreign bidders will be invited to tender for a further 20% shortly thereafter.14

Among the key aims of restructuring process are to improve the financial health of the industry, bolster the quality of service and supply and ensure electrification targets are met. However, the Congress of South African Trade Unions (COSATU) believes that electricity should remain publicly owned and controlled. Public ownership, they say, allows the state to drive universal service provision, ensure that electricity contributes appropriately to overall energy and industrial policies, and determine affordable pricing structures. Private ownership or a more commercial operating structure would shift Eskom's focus towards profit maximisation at the expense of social objectives.15

The privatisation proposal forms part of a broader restructuring effort that, according to the Government's own consultants, will raise the cost of electricity to households by between 22 and 50 percent. The proposals appear to aim almost exclusively to raise funds by selling public assets. According to COSATU the privatisation of Eskom's privatisation would contradict the Government's previous commitment to enhance services for the poor and support economic development.

In October 2000, unions across South Africa launched a general strike against the government's privatisation plans. At least two thirds of all workers -- more than five million people-- throughout the country participated in the action, according to COSATU. "The selling off of these assets has a negative bearing on the national development programmes, such as electrification, the installation of and access to telephones, the accessibility of water etc. to millions of South Africans," argued the National Union of Mineworkers, which called the action a "strike against poverty"16

Electricity Crisis in Soweto

Soweto, home of the Convention Centre which will host the Global NGO forum of the World Summit on Sustainable Development, is also the site of an intense struggle between local residents and Eskom. Angry consumers have accused Eskom of cutting off their electricity indiscriminately and without warning.


"It is incumbent upon Eskom to use some of the funds we have generated to contribute to sustainable development on a global scale."

--Eskom CEO Reuel Khosa

Community groups claim that electricity rates in Soweto are disproportionately high. Soweto residents are charged 28 cents per kilowatt/hour while Sandton, (the site of the main UN Summit) residents pay 16 cents and big business pays seven cents. In rural areas, consumers are charged 48 cents per kilowatt/hour.

"Eskom proudly claims to be one of the New South Africa's success stories, having provided electricity to more than 300,000 households each year, yet, many tens of thousands cannot afford the full-cost-recovery policy that Pretoria's minerals and energy ministry adopted in 1998," according to journalist Patrick Bond. "The neoliberal policy of cutting those who cannot afford their bills was especially unfortunate, because virtually all black South Africans were denied Eskom's services until the early 1980s due to apartheid racism," he adds.

In Soweto this is amplified by the fact that nine out of 10 households in Soweto are behind in electricity payments, and six out of 10 have had their power supply cut in the past year. The township's debt to Eskom has spiralled to a billion rands. Some households are more than 30,000 rands in arrears, and a large number of arrears are more than four years old, suggesting a long-term debt trap for many low-income households.

Apart from the disconnections, another 10 percent of households had their electricity cables permanently removed by Eskom for allegedly reconnecting illegally to the electricity grid. Some households have gone without power for four years. A survey by the Municipal Services Project concludes that the health and safety implications of these cutoffs are serious. The MSP concluded that electricity was unaffordable and a flat rate must be brought back. But despite the research, Eskom said they would go ahead and cut off 20,000 households per month.17

On March 21, 2001 the day that South Africa celebrates Human Rights Day, more than 600 people marched from Orlando West to the council's offices in Jabulani to protest against evictions, water and power cut-offs, and to protest against the national government's moves to privatise Eskom.

Three months later, angry Soweto residents marched to Johannesburg Mayor Amos Masondo's house, in the formerly all-white middle-class suburb on Kensington, to protest his failure to respond to their demands. They attempted to disconnect the mayor's electricity and water supply. The protests, led by the Soweto Electricity Crisis Committee (SECC), culminated in an Eskom boycott.18 Among their demands were to:

  • Stop all electricity cut-offs
  • Scrap all arrears
  • Ensure affordable electricity for all
  • Offer special rates for pensioners, unemployed, disabled
  • Provide free electricity and free water for basic needs as promised
  • Allow community and worker control of electricity provision and management.19

    The SECC has launched a campaign called Operation Khanyisa (meaning "to light") in which teams of trained activists reconnected people's electricity. "We see this as a form of mobilising. We don't ask why or when the people were cut off, we just switch them back on. The SECC believes that everyone should have electricity, " explained one activist. Over six months, more than 3,000 families had their electricity supplies illegally switched back on, after being left in darkness when they couldn't afford to pay their enormous monthly bills.20 (See Soweto Voices)

    The SECC argues that electricity and water cut-offs are unconstitutional and is preparing to challenge them in court.

    Leading the Way for Africa's Energy Privatisation

    Africa has recently moved towards liberalisation of its power sector, and cash strapped governments are looking to private capital to increase supply. Similarly many public energy authorities have over the years been unable to meet the nation's electricity needs, with supply consistently falling behind production.

    Taking advantage of this climate, Eskom aims to establish itself as Africa's premier, and possibly only, energy utility. This means the company is expanding beyond electricity to other fields, like telecommunications and information technology. While the privatisation of Eskom in South Africa has received significant attention, the company's role in supporting privatisation elsewhere in Africa is less well known.

    At present, South Africa exports electricity to all its direct neighbours, namely Lesotho, Swaziland, Namibia, Botswana, Zimbabwe and Mozambique. The company intends to have 50 percent of its investment outside South Africa, with particular emphasis on sub-Saharan Africa, in the next five years.21

    Eskom Enterprises was formed in 1999 to carry out its energy and related activities outside South Africa. It also houses Eskom's information technology, telecommunications and consulting services.

    Eskom Enterprises has already begun to establish a presence in Mali, Ghana, Tanzania, Democratic Republic of Congo, Angola, Zambia, Mozambique and Botswana. The organisation had also been in talks with Egypt, Morocco, Tunisia and Libya. (See related article.)

    Eskom and the World Summit on Sustainable Development

    In his Chairman's Report, Eskom CEO Reuel Khosa states "it is incumbent upon Eskom to use some of the funds we have generated to contribute to sustainable development on a global scale. ... We cannot remain immune from the influence of the global forces at play."22 One of the key global forces at play during the World Summit on Sustainable Development will be the growing political campaign, led by non-governmental organisations, in support of a legally binding corporate accountability convention.


    The Johannesburg Summit is framed by the question of whether governments can re-direct corporate behavior in more sustainable directions while at the same time increasing partnership and cooperation with the private sector.


    The Johannesburg Summit is framed by the question of whether governments can re-direct corporate behavior in more sustainable directions while at the same time increasing partnership and cooperation with the private sector. Voluntary corporate responsibility, while potentially positive, can become an obstacle when used as a diversion from attempts to hold corporations accountable. A Convention on Corporate Accountability would provide a step toward democratic control over corporations at an international level."23

    In solidarity with the energy insecure residents of Soweto all participants at the World Summit on Sustainable Development's Global NGO Forum should call on Eskom to:

    1. Halt and reverse privatisation and commercialisation.
    2. Scrap electricity cut -offs and arrears.
    3. Implement the free electricity program promised in the 2000 municipal elections.
    4. End the skewed rates that do not sufficiently subsidize low-income black people.
    5. Add special pricing provisions for vulnerable groups - disabled people, pensioners, people who are HIV-positive.
    6. Expand electrification to all, especially impoverished people in urban slums and rural villages, the vast majority of whom do not have power.

    In addition, Eskom should demonstrate its commitment to working towards sustainable development and poverty eradication prior to the Earth Summit by implementing the following measures:

    1. Immediately abandon the development of the Pebble Modular Nuclear Rector.
    2. Establish a national time-bound commitment to directing equitable resources to the implementation of wind power, solar technologies, and to other renewables (such as micro-hydro, biomass and wave power)
    3. Announce a public commitment to set aside approximately 200 megawatts of generation capacity to create renewable energy power supplies in South Africa.
    4. Review current energy prices with a view to include social and environmental costs, reduce perverse subsides, establish and maintain marginal cost pricing for electricity, and to implement measures to protect the poor.
    5. Endorse the findings and recommendations of the World Commission on Dams Final Report.

    These measures would go beyond the nine principles in the Global Compact towards truly sustainable development.



    Footnotes:

    1 Eskom Annual Report 2001

    2 Patrick Bond Power to the powerful in South Africa... But the people also have Power Multinational Monitor, February 2002 International Monitor http://www.tni.org/energy/dp/safrica.htm

    3 South African companies, Anglo American, Eskom, Murray & Roberts, South African Airways, and the South African Post Office have each contributed R5 million towards the work to be done by the Johannesburg World Summit Company (Jowsco). South African corporates throw weight behind the Johannesburg Summit 2 April 2002 http://www.joburgsummit2002.com/

    4 A business preparatory process for the WSSD is being undertaken by the South African business community is being coordinated by the recently established Business Coordinating Forum (BCF). This Forum, chaired by Tokyo Sexwale and Vive Chair Reuel Khoza, comprises representatives of companies and business associations. The Business Coordinating Forum was set up expressly to co-ordinate national business initiatives in the preparations for the Summit. The objectives of the BCF are to:

  • Co-ordinate, integrate and liase with other South African and international business organisations.
  • Co-ordinate with the World Summit organizations stakeholder sectors and other relevant groupings for pre-Summit and Summit events.
  • Liase with government through the Multi-stakeholder Advisory Committee.
  • Participate in sub-regional, regional and international World Summit preparatory meetings and initiatives to assist in developing the business and industry sec- tor position.
  • Raise awareness within the business sector of the Johannesburg Summit.
  • Develop action plans and programmes to promote involvement of South African business and industry.
  • Provide an input into the national sustainable development strategy
    Consequently, South Africa will be hosting the World Summit on Sustainable Development in 2002. Eskom will be participating in this summit, as it believes it should play its rightful role as a leading organisation.

    5 Eskom is member of the Global Compact

    6 Eskom Vision statement

    7 Eskom strategy a world first , Business Times, Survey (no date)

    8 Eskom Environmental Report 1998, page 11

    9 The energy intensive sector: Considering South Africa's comparative advantage in cheap energy Seeraj Mohammed, TIPS Conference September 1997

    10 Clive van Horen Briefing paper .The South African Energy Sector, (no date)

    11 For more information see : Earthlife Africa Johannesburg, Nuclear Energy Costs the Earth Campaign, http://www.earthlife.org.za

    12 For over 20 years the South African nuclear industry enjoyed the benefits of large state subsidies, receiving between 85 to 90% the Mineral and Energy Department's budget between 1985 and 1989.

    13 Eskom powering ahead despite challenge, Robyn Chalmers Business Day Mar 12 2002 http://www.bday.co.za/bday/content/direct/1,3523,1041594-6078-0,00.html

    14 COSATU Submission on the Draft Eskom Conversion Bill Submitted to the Department of Public Enterprises, 23 November 2000 http://www.cosatu.org.za/docs/2000/eskomcon.htm#Approach

    15 South Africans Strike Against Privatisation - and Poverty Electricity sell-off challenged , ICEM Update 29 August 2001 No. 59/2001 http://www.icem.org/update/upd2001/upd01-59.html
    16 People's Power in Soweto! http://www.cosatu.org.za/samwu/nov2001secc.htm

    17 According Bond, the SECC's and the national Anti-Privatization Forum that will serve as the main activist hosts for protesters at the upcoming Johannesburg World Summit on Sustainable Development. Known as `Rio+10,' the August 26 - September 4 , " in Power to the powerful in South Africa... But the People also have Power Patrick Bond Multinational Monitor, February 2002 International Monitor http://www.tni.org/energy/dp/safrica.htm

    18 RALLY TO LAUNCH BOYCOTT OF ELECTRICITY PAYMENTS IN SOWETO by Soweto Electricity Crisis Committee - press s August 28 2001, Tue, 3:02am http://southafrica.indymedia.org/display.php3?article_id=34

    19 Patrick Bond, Power to the powerful in South Africa... But the People also have Power, Multinational Monitor, February 2002

    20 International Monitor http://www.tni.org/energy/dp/safrica.htm

    21 Eskom sets its sights on other African parastatals, Samuel Mukalaz Independent Newspapers http://archive.iol.co.za/Archives/1998/9805/20/eskom18.html

    22 Eskom Annual Report 2001

    23 Greenwash + 10 The UN's Global Compact, Corporate Accountability and the Johannesburg Earth Summit Kenny Bruno CorpWatch January 24, 2002 http://www.corpwatch.org/campaigns/PCD.jsp?articleid=1348

     

    Brian Ashe is with EarthLife Africa eThekwini, an environmental justice group in South Africa.