For an Independent Working Class Programme
by Shaun Arendse
What does resolving the Eskom crisis look like for the working class? A reliable and uninterrupted supply of affordable electricity in every household, community and workplace. Job security, decent wages, and workers’ rights for all Eskom employees, including those of the contractors that depend upon it. The corrupt managers, politicians and business people that systematically looted Eskom facing their day in court. This would be the basic outline.
However, these are not the priorities of the capitalist class. They are not trying to resolve the Eskom crisis in the interests of the working class majority. Rather, they are jockeying for position amongst themselves for a slice of the enormous wealth that Eskom controls, and to profit from future changes in electricity generation as the climate crisis increases pressure for alternatives to coal.
The stakes are high. Eskom is a giant within the South African economy. The money that it spends in one year is more than four times that of the next biggest state-owned enterprise (SOE), Transnet. Operating costs run at R140 billion per year – R50 billion on coal, R33 billion on wages, and the remaining R57 billion on fees to contractors and consultants for maintenance and other services. This vast budget does not include the R337 billion spent in recent years on Medupi, Kusile and the lesser-known Ingula hydro-electric plant, or the R23 billion per year (and growing) spent on loan interest payments.
The struggle over who will be able to put (or keep) their fingers in this profitable pie is a bread and butter question for the capitalist class. It is reflected within the ANC as the tug-of-war between the supporters of Ramaphosa and the supporters of Zuma. It lies behind Bathabile Dlamini’s clumsy proposal to move Eskom from the Department of Public Enterprises to the Department of Energy, and the differences within the cabinet on the future role of so-called ‘Independent’ Power Producers (IPPs – see below). Outside the ANC, the DA champions allowing the ‘Eskom monopoly’ to collapse in favour of IPPs. The EFF and other capitalist political and business groups flirt with reviving a new nuclear-build programme.
Ultimately, the lack of agreement over Eskom’s future reflects the more general impasse of South African capitalism. An intensified struggle within the ruling elite is one of its symptoms. This is blunting the ability of the Ramaphosa government – the current capitalist ‘executive committee’ – to impose a solution on the squabbling factions, whether they are inside or outside the ANC. This has wider implications for capitalism’s sick economy. The growth in Eskom’s debt to R450 billion is a systemic danger. It is one of the issues at the heart of the threat by credit ratings agency Moody’s to downgrade SA to ‘junk’ with all the consequences that would have for jobs and living standards (see SA’s Economic Crisis – No Way Out for the Working Class Under Capitalism).
Most people agree that Eskom needs ‘fixing’. But this means one thing for the capitalist class and something entirely different for the working class. It is the capitalist class’s government that is in power. Therefore, only different capitalist ‘solutions’ are on the table. All of which will come at the expense of workers’ jobs, higher electricity prices, cut-offs, and millions of people being forced to remain ‘off-grid’. This demands that the working class put forward an independent programme that calls time on the capitalist class’s self-interested management of Eskom.
Seeds of the Crisis
After the 1994 elections, the electrification of the country was high up on the list of expectations of the new ANC government. At the end of the apartheid-era less than one-third of black households had access to electricity. Under enormous pressure to improve the lives of the working class who had lifted them into power, household electrification rose from 35% in 1990 to 82% in 2008 when loadshedding first began. These figures do not fully capture the scale of electrification, as the population increased by nearly 12 million, or 25%, in this period.
But the embrace of neo-liberal economic policies under the ANC’s Mandela and Mbeki governments laid the foundations for the Eskom crisis. This huge increase in electrification was achieved without building any new power stations. In fact, the Mbeki government placed a moratorium on any new building by Eskom, trusting the capitalist market to fill the growing electricity supply gap via IPPs. This did not happen.
As early as 1998, Eskom management warned that demand would outstrip supply by 2007. Mbeki ignored these warnings because the ANC’s 1996 neo-liberal Growth, Employment and Redistribution policy (Gear) envisaged the commercialisation and privatisation of all services provided by the state. The ‘user pays’ principle that Tito Mboweni is famous for today was the new mantra. Eskom was top of the privatisation list. But attempts to sell it failed as Eskom’s electricity prices were then amongst the lowest, if not the lowest, in the world. Further, the refurbishment and building implied in the engineers’ warnings would require borrowing in the money markets. This debt would make Eskom even less attractive to potential buyers.
By 2008 the warnings of the engineers came to fruition with Eskom was forced to resort to rolling blackouts – load shedding. Upgrades were further delayed by preparations for the 2010 World Cup. Eskom was under orders to keep the lights on come what may to uphold the ANC government’s prestige.
Mbeki lifted the building moratorium in 2004 paving the way for Medupi, Kusile and Ingula to make up the shortfall in energy demand. But it was used to give capitalist investors linked to the ANC – including the ANC’s Chancellor House finance vehicle – the opportunity for self-enrichment via corrupt contracts with multinationals like Japan’s Hitachi. Sixteen years later Medupi and Kusile are still not finished. As a stop gap, between 2007 and 2012, two new diesel and gas plants were completed and four mothballed apartheid-era coal power stations refurbished and brought back into use.
The growing pressure on the electricity supply had other consequences. Eskom’s shrinking ‘reserve margin’, which allows power stations to be taken offline, meant maintenance fell even further back. Maintenance issues were worsened as low-quality coal began finding its way into the system as quality control standards were by-passed as corruption grew into a cancer.
The stacking of SOE boards by Zuma’s ministers to facilitate profiteering via the award of tenders and signing of contracts with government began the wholesale looting of Eskom. The Guptas sucked R-billions out through their companies Tegeta, Oakbay, and Trillian. But they were simply the most brazen. For example, in a two-year period, during and after the 2014 loadshedding crisis, R200 million was siphoned-off via diesel-supply contracts with front-companies owned by friends and family of senior Eskom staff. The rampant manipulation of tenders at Medupi and Kusile was decisive in the explosion of Eskom’s debt. The cost of these projects expanded from R150 billion when construction began, to over R300 billion today. Also decisive were Eskom’s coal contracts which a 2015 report described as a “black hole”.
With one exception, all of Eskom’s coal-fired power plants are linked to ‘tied-mines’. The mining companies that operate them typically sign thirty to forty year contracts with Eskom. They agree to supply coal at low-cost fixed rates via conveyor belts running directly into adjoining power stations. The mining companies make the bulk of their profits through exporting coal after meeting their Eskom quota. Stephan Hoffstatter’s book License to Loot suggests that from 2001, Majuba, the only power station without a tied-mine, became a testing ground for the introduction of inflated short-term contracts. These were not stop-gaps whilst long-term contracts were negotiated, but became a new standard, with disastrous consequences for Eskom’s finances.
This opened-up the possibility of making a ‘quick buck’ from Eskom’s coal budget. At the head of the new queue of profiteers was the emerging layer of black capitalists. But success beyond Majuba depended on dislodging Eskom’s long-term contracts with established mining companies. This is what lies behind the hysteria against so-called “ever green” contracts in the hands of ‘white monopoly capital’ by the supporters of so-called Radical Economic Transformation.
The Gupta’s boldest and most brazen state-capture projects included the scandal of over-priced and sub-standard coal from their Brakfontein coal mine and seizing control of the Optimum coal mine from multinational Glencore. In both cases the amount Eskom paid per tonne of coal sky-rocketed. Further opportunities were opened up by Lynne Brown, then Minister of Public Enterprises, when she blocked Eskom from investing R1.8 billion to sink a new shaft at Matla power station’s tied-mine. This could have supplied Matla with low-cost coal for decades. Instead, Eskom spent an additional R5 billion in just two years to truck coal in. A 2015 report projected that over an eight-year period Eskom’s growing reliance on short-term contracts would inflate its coal spend by a cumulative R90 billion.
Trying to explain Eskom’s problems by claiming it is ‘over-staffed’ or does not charge ‘cost-reflective tariffs’ is nothing but a smokescreen. Rampant profiteering, corruption and looting is the real cause of the Eskom crisis.
RET vs WMC?
Those whose fingers have been caught in the till encourage the idea that a struggle is underway between the forces of Radical Economic Transformation (RET) and White-Monopoly Capital (WMC). Hofstatter’s book gives anecdotal accounts of how Zuma’s Eskom deployees tried to win support for corruption from Eskom staff by banging the drum of ‘transformation’. Superficially, the struggle, for example, over the control of coal contracts can seem to support this idea. But trying to fit the struggle over Eskom’s future into a neat RET vs. WMC box falls apart under scrutiny.
At every stage, Zuma and the Guptas were aided by so-called WMC in the looting of Eskom. As early as 2011, the hijacking of a tender for steam generators at the Koeberg nuclear power station was done in collaboration with French firm Areva. US firm McKinsey worked hand-in-glove with the Gupta’s Trillian. UK based Deloitte has been forced to pay back R150 million it received from Eskom in an irregular tender. Eskom has been selling electricity below cost to Australian miner South32’s two aluminium smelters for more than ten years – accounting for 3% of Eskom’s electricity output.
From the other side, the Zuma administration repeatedly tried to reduce mining company Exxaro’s share of the Eskom coal budget. Under Brian Molefe, the renewal of Exarro’s long-term contracts with Arnot and Mafube power stations were blocked. The machinations of Lynne Browne at Matla mentioned above, were also against Exarro. This despite Exarro being a Level 2 ‘black-empowered’ miner, i.e. 50%+ ‘black-owned’.
It is true that there is an important fault-line within the ruling class between the established, largely white-owned, capitalist monopolies and the black elite that controls the capitalist state. Especially during an economic crisis, such as the one South Africa is mired in today, this fault-line can be the source of friction. But it is important to keep a sense of proportion about it. The entire post-apartheid political and economic order is rooted in the historic compromise between white big business and the black political elite. This compromise was, and remains, an alliance for the preservation of capitalism and the continued exploitation of the working class (see The Negotiated Settlement and the 1994 Elections).
Black Economic Empowerment, the neo-liberal economic framework that defends the profits of the monopolies, opening-up a vast market for tenders and outsourcing by limiting the role of the state and SOEs, ‘new-order’ mineral rights, and, crucially, Cosatu’s alliance with the ANC, are among the mechanisms for managing that compromise, and sharing, albeit unequally, the spoils of capitalism.
However, the excesses of the Zuma administration threatened to undermine all of this. Especially under the blows of the 2007-09 world economic crisis, sections of the aspirant black capitalist elite needed a more aggressive policy to advance their interests. No real innovation was required however. Zuma’s state-capture project simply took tenderpreneurship to its logical conclusion in a semi-official crony capitalism. The support that Ramaphosa now enjoys from big business is not because he is simply the ‘tool’ of WMC, as the RETers would argue, but because he is committed to trying to restore some equilibrium within the ruling class.
Ultimately, RET is nothing but a posture by a section of the black petty bourgeoisie. Their faux-radical nationalist rhetoric generates a lot of heat, but no real light. It is a crude attempt to try and mobilise the black poor, the black working class and the black middle class majority to support their capitalist aspirations. But there is never any serious attempt to organise and mobilise the black masses for action. This reveals RET for what it is: a negotiating stance.
This is confirmed by recent upheavals in the global coal market linked to the escalation of the climate crisis. This has left ‘black-empowered’ Exarro and the 91% black-owned Seriti supplying 70% of Eskom’s coal. Have the RETers declared this a principled victory? No, they have revived the idea of nuclear instead because their clique still does not sufficiently have its fingers in the Eskom pie.
There is some excitement, especially amongst the white middle class, that so-called ‘Independent’ Power Producers are the answer to the Eskom crisis. They dream that IPPs are the route to transforming South Africa into a petty bourgeois utopia made in their own image: a nation of self-sufficient small property owners. Others hope that IPPs are a magic bullet to resolve the climate crisis. But these fantasies have nothing to do with the reality of IPPs.
The word “independent” in IPPs is a euphemism for what in reality is a private profit-making investment consortium. The Renewable Energy Independent Producer Power Procurement Plan (REIPPPP) was introduced during the Zuma-administration. So called ‘public-private’ deals worth R194 billion were signed. Under Ramaphosa REIPPPP has continued leading to an additional R52 billion worth of deals.
Ramaphosa has heralded a so-called “green energy revolution” in which he seeks to link IPPs to the expansion of renewable energy. This is nothing more than an attempt to abuse the climate crisis as a cover for the privatisation of South Africa’s electricity supply and the creation of a new capitalist electricity market. Coal miner Exxaro’s CEO, Mxolisi Mgojo, explained that his company’s recent expansion into renewables is “being driven by a more-drastic-than-expected liberalisation of SA’s energy market”. He let the cat out of the bag!
The DA encourages the middle class’s fantasies about what IPPs represent in its campaign to “free South Africans from Eskom”. They champion allowing “citizens to generate their own power”. The DA proposes tax rebates for homeowners to install solar systems and the cancellation of VAT on LED lightbulbs and energy-efficient appliances. But the real heart of the DA’s campaign is to allow municipalities to buy electricity from IPPs. In 2017, 42% of Eskom’s power reached households and businesses via municipalities, generating revenues of R22.5 billion.
Just as the RETers under Zuma eyed Eskom’s R50 billion coal budget as ripe for plucking, the business interests close to the DA are eyeing municipalities’ R22.5 billion electricity revenue with the same greed. Both want the money to flow where they are best positioned to profit from it. Just as the RETers use political fronts to try and mobilise the black masses to support business interests close to them, the DA is trying to mobilise the middle class to support business interests they are close to.
RETers like the EFF have counter-posed nuclear to renewables, calling it the “black option”. But there is nothing inherently ‘anti-black’ about IPPs, anymore than there is anything inherently ‘anti-black’ about coal. In fact, IPPs are required to have significant ‘black’ ownership – the historic compromise was built into IPPs from the start. The original REIPPPP envisaged IPPs owned and operated by a mixture of black industrialists (40%), community trusts, foreign shareholders and ‘other’ South African shareholders.
The squabble around IPPs reflects that at this stage, the RETers expect bigger returns from coal (and nuclear), and a section of DA-supporting businesses expect bigger returns from municipality-supplying IPPs. But there are no strictly demarked ‘spheres of influence’. They will all move to wherever the greatest opportunity for profit is.
Even if Ramaphosa’s anti-corruption drive in Eskom is a complete success and the Zondo Commission claims some high-profile scalps, this will do little more than re-define the limits for the legalised plunder of Eskom. The foundation of the capitalist class’s parasiting on the labour and taxes of the working and middle classes lies in the system of tenders, outsourcing and the private-ownership of the coal mines, road transport, and the other industries that Eskom supports. No faction of the capitalist class threatens these foundations; ultimately, they all want to strengthen them.
Any return to nuclear – an extremely unlikely prospect – would unleash a tender feeding-frenzy dwarfing that at Medupi and Kusile. The cuts to the public sector wage bill and department budgets in the February budget are, in large part, to guarantee that Eskom’s vast debt is paid back in full to its capitalist creditors, with profit. The Cosatu leadership’s aborted proposal for the Government Employees Pension Fund to take-over a majority of Eskom’s debt was a proposal to guarantee just this.
The looming ‘unbundling’ of Eskom is clear preparation for either the partial-privatisation of Eskom, or the admission of IPPs under state supervision into a more expansive capitalist energy market. Marxists always prefer state ownership to private ownership. But the extent to which a nationalised industry, when run by a capitalist government in a capitalist economy, is any sort of genuine ‘alternative’ is extremely limited. Capitalist governments use state ownership to support, defend, and even boost, profits in the private sector. In keeping with this, any new energy market will almost certainly position the state as a lender of last resort to bail out Eskom if investor funds dry up. Under capitalism, SOEs are, notwithstanding recent bailouts, run as commercial entities with the government as ‘shareholder’. There is no co-ordination, let alone planning, between the SOEs. The ANC’s model of state ownership has nothing in common with real socialist nationalisation under workers control and management.
Burning coal contributes massively to global warming and the unfolding climate crisis. Local communities near coalfields are blighted by pollution from coal mining and road transport. It is clear that South Africa must rapidly move away from coal. But the working class must reject the idea that this can only be done via IPPs. The demand must instead be for a massive publicly-owned renewable energy programme. This must be under the democratic control of workers and communities and rolled-out in a way that not one single coal miner will lose once cent of income.
The capitalist class’s relentless profit-seeking must be choked-off. This must be the aim of an independent working class programme, at the heart of which must be the demand for the abolition of tenders and outsourcing in Eskom, the nationalisation of the coal mines and existing IPPs, opposition to dangerous nuclear power and new IPPs, and the rapid development of publicly-owned renewable energy to replace coal without the loss of a single job.
- No job losses at Eskom. No electricity cut-offs. Introduce a sliding-tariff based on ability to pay, with the poorest households exempt.
- Recover the stolen R-billions! Organise a worker- and trade union-led commission to investigate and drive-out corruption at Eskom. Review all Eskom contracts with big business.
- Stop the legalised looting of Eskom! End outsourcing. Kick-out big business ‘consultants’. Cancel all contracts and tenders, bringing workers and services in-house. An immediate moratorium on all interest payments on Eskom debt whilst a worker- and trade union-led debt repudiation commission investigates
- Sack the Eskom board! For workers’ control via a fully elected and recallable board composed of representatives of Eskom workers, their trade unions and consumer and community groups.
- No to the privatisation of electricity! No unbundling of Eskom! Oppose IPPs! Oppose nuclear! Complete the electrification of South Africa through massive investment in publicly-owned renewable energy programme under the democratic control of workers and communities.
- Nationalise the coal mines under democratic workers control! Socialist planning to solve the environmental crisis. Rapid re-direction of energy generation toward renewables. Retrofit the entire economy to eliminate pollution with re-training and guaranteed jobs for any workers whose jobs are rendered obsolete.
- Reject the capitalist organisation of the SOEs as profit-driven silos! Integrate the SOEs according to a democratic economic plan, reducing waste and achieving scales of economy, whilst protecting jobs, wages and conditions.
- For a socialist economy to meet the needs of the working class majority. Nationalise under democratic working class control the biggest companies in all the key sectors of the economy: agriculture, mining, construction, transport, manufacturing, telecommunications, wholesale, retail and distribution. Integrate nationalised industry according to a democratic socialist plan of production to raise wages, protect and create jobs and end poverty.
26 March 2020
Figures from Licence to Loot: How the Plunder of Eskom and Other Parastatals Almost Sank South Africa, Stephan Hofstatter (2018)
Stage 4 Load-Shedding Hits as Cabinet Divide on Energy Deepens, Ferial Haffajee, Daily Maverick (11 March 2020)
The Great Energy Debate: Atoms vs Photons, Sasha Planting, Daily Maverick (6 March 2020)
 Eskom Supplies Electricity at a Loss to Australian Group, BusinessLive (4 March 2020)
Exxaro Embraces a Green Future, BusinessLive, 12 March 2020
DA Launches Countrywide Effort to Free South Africa from Eskom, DA Statement (10 March 2020)
Electricity: Big Business for Municipalities, StatsSA (10 July 2017)
Outlining the REIPPPP, presentation by the Independent Power Producer Office (July 2014)&IPPP: An Overview, Independent Power Producers Procurement Programme report (31 March 2019)