ATC191016: Report of SCOPA on its oversight visit to ESKOM and its projects of Medupi and Kusile, from 26 to 30 August 2019, dated 16 October 2019
ESKOM Update on SCOPA recommendations following oversight visit, with Deputy Minister
The Chairperson said that there seemed to be no coordinated approach that indicated, with certainty, what the stakeholders were each responsible for in the ESKOM debt. The Chairperson of the Inter-Ministerial Committee on Service Delivery (IMCSD) was not in attendance because the function of the municipal debt to ESKOM did not reside with the IMCSD. He had a scheduled meeting with the Office of the Deputy President on 03 March 2020 to discuss the resolution of the debt but the meeting did not happen.
Members felt that Minister’s presence was of value because it would enable an effective dialogue to resolve how best to address the situation, in absence of an institutional base tasked by government. SCOPA was only now informed that scope and mandate of the IMCSD did not include the ESKOM Board; this posed a challenge of inadequate coordination. It would not be productive to have a situation where all implicated parties would be refuting and deflecting responsibility – hence the need for a coordinated structure where all these bodies would account. The ESKOM debt was no longer an isolated issue but a national crisis that had now reached unprecedented heights. The crisis had to be prioritised with the warranted urgency because the consequential technical recession directly affected the national economy. Where does the matter reside, within the Cabinet?
The Chairperson proposed that a meeting be held on 18 March 2020. SCOPA would send communication to the leader of government business, the Minister and the Presidency, ESKOM, COGTA, NT, SALGA, and the MECs in order to establish a mutual understanding. In April, the Committee would then summon the municipalities individually to come and explain their circumstances; to also indicate their debt payment plans. Before this happened, the coordinated structure had to be formed.
One Member recounted that the meeting, between the Chairperson’s office and the office of the leader of government business, did not occur. There thus could not be any productive engagements without a directive from the latter office; its lack of cooperating would limit the progress of the meeting on the 18th. It would be a sunk cost to transport the relevant officials to Parliament without a clear directive being given.
Members supported the Chairperson’s motion for the meeting on the 18th but expressed her disappointment that the debtors were not in attendance individually to account. The lack of a coordinated structure was an opportunity for SCOPA to take up the responsibility to hold relevant parties accountable.
The Chairperson announced that this evening’s meeting would be meeting with the ESKOM Board to finalise the report on the oversight visit to ESKOM.
Opening Remarks by the Chairperson
The Chairperson welcomed the Members, the Executive and all other stakeholders to the meeting.
The Chairperson said that there seemed to be no coordinated approach that indicated, with certainty, what the stakeholders were each responsible for in relation to the ESKOM debt. The Chairperson of the Inter-Ministerial Committee on Service Delivery (IMCSD) was not in attendance because the function of the municipal debt to ESKOM did not reside with the IMCSD. The contradiction was that in December 2019, the Committee was informed that it should interact with the IMC regarding this debt matter. He had a scheduled meeting with the Office of the Deputy President on 03 March 2020 to discuss the resolution of the debt but the meeting did not happen.
The bottom line was that the Committee had to play its oversight role in ensuring that the debt would be paid. Any other technical and policy matters should be managed on portfolio committee level. The lack of coordination was far worse than the SCOPA had anticipated. The Inter-Ministerial Task Team (IMTT) in the Fifth Administration had dismally failed to deal with the issue of the debt; there was currently no end in sight but the Committee would have to devise the processes for the way forward.
Mr S Somyo (ANC) appreciated that the Chairperson acted in accordance with the Members’ view that whoever, within government, was tasked with resolving the debt, it would necessitate a collaborative effort to which even the Committee would need to contribute in its oversight role. The Minister’s presence was of value because it would enable an effective dialogue to resolve on how best to address the situation, in absence of an institutional base tasked by government. Several municipalities were disconnected from the grid due to being indebted to ESKOM.
Mr B Hadebe (ANC) welcomed the presence of the Minister and the ESKOM Board. The fifth Administration saw it fit to establish the IMTT to deal with the issue of the ESKOM debt which was escalating at an alarming rate. Unfortunately, the IMTT was not reinstituted in the new Administration. SCOPA was only now informed that scope and mandate of the IMCSD did not include the ESKOM Board; this posed a challenge of inadequate coordination. The Department of Public Works and Infrastructure (DPWI) was reportedly ESKOM’s highest debtor. It would not be productive to have a situation where all implicated parties would be refuting and deflecting responsibility – hence the need for a coordinated structure where all these bodies would account. The Minister could help guide the Committee on the approach used henceforth.
Ms B van Minnen (DA) agreed with Mr Hadebe that this was an untenable situation. The country was now in a technical recession. ESKOM was a crucial entity and the outstanding debt was of critical urgency. The parliamentary oversight was despicably undermined and the Committee should register its displeasure about this through the appropriate channels.
Ms N Tolashe (ANC) appreciated the presence of the Minister and implored Members to be more understanding of the restriction of the Ministry’s role, within the IMCSD, in addressing the debt problem; she was only present by directive from the Deputy President (DP).
This meeting would not be productive because the Committee was already fully aware of ESKOM’s condition and all its debtors, as presented by the South African Local Government Association (SALGA), DPWI, etc. The fifth administration took a collective decision to institute a coordinating body but there had not been any since. Although the subject matter was not a responsibility of the Minister, the Deputy President had to give directive on how the processes should proceed. A lot of money was spent on bringing the officials in attendance and therefore the most important agenda item was to deliberate with the different bodies on how best to remove ESKOM from the quagmire it was in.
Mr R Lees (DA) reckoned that the IMTT had failed for various reasons. ESKOM was to blame for the dilemma because had it cut off the electricity supply to its debtors, the debts would not have escalated. The economy would fail if the utility were to be shut down.
It was not a question of the current management because most incumbents had inherited the state of the entity. However, had ESKOM operated like a proper business from the start there would not be a problem today. This problem now needed a coordinated process, facilitated by SCOPA. The Committee should host the Finance Minister and the DP to discuss the matter and hopefully agree that National Treasury (NT) should pay ESKOM directly, ensuring that the utility would not have to be shut down. It was the Committee that had to drive the alleviation of the debt problem; ESKOM and the Minister could not solve it alone.
The Chairperson reckoned that there seemed to be a lot of politics over principle – political correctness over doing the right thing. There was no point in coming to lament on the state of ESKOM because the Committee had heard the entity’s story multiple times. Something had to give with the Executive – it had to actively demonstrate that it recognised the gravity of the crisis. ESKOM also had to take initiative to address its own processes. The reasons that the entity had presented were purely excuses coined to deflect responsibility.
Dr Nkosazana Dlamini-Zuma, Minister of Cooperative Governance and Traditional Affairs (COGTA), thanked the Chairperson and the Members for their oversight input.
Dr Dlamini-Zuma confirmed that COGTA could not independently solve the debt problem, particularly because it had no leverage over municipalities. It was unfair that Parliament had summoned every stakeholder except ESKOM’s actual debtors – the municipalities. There was a need for the South African Local Government Association (SALGA) to hold its municipalities accountable for their debts to ESKOM.
The IMCSD would engage NT on the matters that were being raised at some stage and the resolutions would be communicated at an appropriate time. She would report back, to the DP, the concerns expressed by Members and emphasise the urgency of the matter.
Mr Hadebe reemphasised that ESKOM’s debt was no longer an isolated issue but a national crisis that had now reached unprecedented heights. It could not squarely be assigned to one Department. He hoped that the Minister would propose a coordination mechanism that would facilitate remedial action, since the Committee was told that the matter is no longer a mandate of the IMCSD. The crisis had to be prioritised with the warranted urgency because the consequential technical recession directly affected the national economy. Where does the matter reside within the Cabinet? The purpose of the meeting was to come up with solutions that would help deal with ESKOM’s challenges. SALGA and the local municipalities would be summoned to Parliament but it would be impossible to deal with the culprits without a coordinated approach.
The Minister replied that Mr Hadebe posed an unfair question; addressing it was not part of her scope but that of the leader of government business.
The Chairperson suggested that the room should assume the persona of the IMTT because, unless the matter was dealt with in a coordinated way, the unproductive disagreements would be endless and the debt would continue to escalate. The debt in itself was called into question. Section 71 reports by municipalities were not satisfactorily indicating how and when the debts would be paid.
The Chairperson proposed that a meeting be held on 18 March 2020. SCOPA would send communication to the leader of government business, the Minister and the Presidency, ESKOM, COGTA, NT, SALGA, and the MECs in order to establish a mutual understanding. In April, the Committee would then summon the municipalities individually to come and explain their circumstances; to also indicate their debt payment plans. Before this happened, there had to be a coordinated structure which would be the instrument used to handle the matter. There was merit in what the DPWI had done – approaching each municipality to verify invoice issues before payments were processed. In the absence of a broader assessment and analysis of the ESKOM debt, the DPWI would also have to present its modus operandi, which the Committee would test. The major flaw of all the exercises around the debt management was that there was no common approach amongst the various role players. The limitations of each body had to be alleviated in a consolidated fashion to optimise the effectiveness of the coordinated structure which was to be established.
The Committee had not called the municipalities because it laboured under the impression that the structures that had been set up at an Executive level had been doing the work required of them. The ESKOM debt continued escalated, despite these supposed interventions. It was unacceptable that the Department of Public Enterprises (DPE) was also cited for owing ESKOM. If there was no compliance from the very same department expected to enforce it, there would obviously be runaway debt. It would also not be productive to summon the IMCSD because it would probably deflect responsibility – hence the need for a coordinated structure. There was clearly an unprecedented level of failure and incompetence in properly coordinating a way forward. At every material stage of the deliberations that had happened, nothing seemed to speak directly to debt reduction, as if no one recognised the crisis at hand. This was creating a conducive and enabling environment for municipalities and other ESKOM debtors to be complacent about paying their debts. There were still unresolved challenges even with prepaid electricity metres and this made tariff billing issues prevalent at a municipal level. This also had to be addressed.
Mr Lees added that the Committee needed to be cautious in differentiating what was owed to ESKOM from what was owed to municipalities – one debt matter should not hinder progress of the other. SALGA members could not pay their debts because they also had not been paid by the DPWI. The DPWI owed money to municipalities and not ESKOM.
The meeting on 18 March 2020 would require SCOPA to set aside the full day if it would to meet all the relevant role players.
He had requested a prepaid electricity metre for the past five years but was repeatedly told that he was not eligible for it because his property was not part of municipality cluster.
Ms Tolashe recounted that the meeting, between the Chairperson’s office and the office of the leader of government business, did not occur. There thus could not be any productive engagements without a directive from the latter office; its lack of cooperating would limit the progress of the meeting on the 18th. It would be a sunk cost to transport the relevant officials to Parliament without a clear directive being given.
Mr Somyo supported the Chairperson’s proposal of the meeting on the 18th of March but also felt it was crucial for the Chairperson to resuscitate his meeting with the Deputy President and have it before the 18th. SCOPA had the responsibility to invite all the relevant bodies. The debt report received from ESKOM indicated that the debt had escalated from about R1.2bn in 2016, to R26.5bn at the time the report was submitted to SCOPA. The report also identified the top 10 municipalities who were key debtors to ESKOM, accounting for about 67% of the total debt. The Committee should engage these municipalities to find ways to reduce the debts. Without parties such as NT, this process would not be efficient.
Mr Hadebe insisted that at some point, the ESKOM Board had to indicate what it was doing to prevent further debt escalation. The utility could not continue supplying electricity without generating sufficient revenue. None of the reports that the utility had submitted had spoken to how the debt matter would be resolved.
The Chairperson reiterated that the IMTT was not reinstituted for the sixth Administration. The IMCSD was not tasked with this matter and there was presently no coordinating body to facilitate the debt resolution processes. It was poor oversight on the part of the Executive to not contextualise the matter in any of its structures at present, despite its importance. The relevant bodies should be consolidated into a new IMTT. If the agenda was that the debts should be paid, the Committee should be told how they would be paid. It was concerning that there was no certainty on the outlook henceforth.
Ms B Swarts (ANC) supported the Chairperson’s motion for the meeting on the 18th but expressed her disappointment that the debtors were not in attendance individually to account. The lack of a coordinated structure was an opportunity for SCOPA to take up the responsibility to hold relevant parties accountable. She was hoping to hear how and why the electricity supply to paying customers was being stopped because of people who tap electricity illegally.
The Chairperson said he was resisting the temptation of letting the ESKOM Board tell its story. SCOPA was only interested in hearing about the payment plans from the entity’s debtors.
The Minister acknowledged all the inputs that were made by Members and indicated that she would submit the concerns to the Deputy President if they wanted her to do so. She would be out of the country on the 18th but would ask the Deputy Minister (DM) of COGTA to attend.
The Chairperson said that the Minister could communicate with the Deputy President but the Committee would send official correspondence on this matter. The Committee did not want to engage in a discussion about excuses for debts not being paid but wanted to develop a roadmap on how to proceed – whether the debtors would be bailed out or when and how the debts would be paid. He would pursue his meeting with the DP.
The Chairperson announced that this evening, SCOPA would be meeting with the ESKOM Board to finalise the report on the oversight visit to ESKOM; a report on the entity’s projects of Medupi and Kusile; as well as an ESKOM update on SCOPA’s recommendations following the oversight visit.
The Committee agreed to have a recess to allow the ESKOM Board to prepare for a briefing, in order to not have the meeting at 18:30.
Briefing by ESKOM
The Chairperson indicated that the ESKOM Chairperson informed him that most of the board members would only arrive later in the afternoon because they had only been scheduled to attend the meeting at 18:30. This meant that the evening briefing had to be reinstated.
Ms van Minnen asked if it was impossible to proceed with the board members were present to reduce the agenda items of the evening meetings. The Committee was taking a meandering route to the hearings and the process had to be sped up.
The Chairperson explained that the hearings had been planned under the impression that today’s meeting would have been fully fleshed, only to discover that the ESKOM debt did not reside with the IMCSD. Instead of having a miniature hearing right now, the meeting should reconvene in the evening as scheduled.
The meeting was adjourned.
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