Eskom Conversion Bill: Cosatu Input; Department Briefing on Additional Amendments

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


12 June 2001

Chairperson: Mr S Fenyane

Documents handed out:

Department Briefing Presentation
Cosatu Briefing on Eskom Conversion Bill (see Appendix)
Eskom Conversion Bill [B16B-01]

Cosatu addressed the Committee, saying it was opposed to the corporatisation of Eskom. It urged the Committee to withdraw the Bill or delay its processing to facilitate proper political engagement. Otherwise it should ensure that any sale of Eskom shares or assets should be subject to the approval of Parliament. Further Eskom should not be a tax-paying entity.

The Committee responded that negotiations should continue between the Department and Cosatu.

The Department took the Committee through the amendments that had been made by the Portfolio Committee. It argued that the incorporation of Eskom was meant to level the playing field between Eskom and its counterparts and to position Eskom for global competition.

The Committee will be visiting Mpumalanga and Northern Province next week to hold public hearings on labour centres, labour inspectors, the Labour Releations Act, Basic Conditions of Employment Act, Employment Equity Act and Skills Development Act and whether there is compliance from companies on these matters. Another area that would be investigated is child labour in agriculture.

Eskom Conversion Bill
Mr Fenyane gave an overview of the process to date. The Department had given them an initial briefing leading to public hearings, during joint meetings held with the Public Enterprises Portfolio Committee.

After welcoming delegates from the Department, Eskom and Cosatu, he informed committee members that earlier that morning, he had received a memorandum from Cosatu asking to address the Committee. He had circulated this to the NCOP Chairperson and Chief Whip.

Ms E Lubidla (ANC) felt that Cosatu had already been given a chance to address them. Mr M Moosa (ANC) differed saying that if Cosatu felt strongly it needed to talk to the NCOP then the door should not be closed to them. Mr L Lever (DP) said if Cosatu had new arguments on the table they should be given the opportunity to speak as long as their address did not degenerate into bad faith between themselves and the Department. Ms B Dlulane (ANC) and Ms M Themba (ANC) agreed. Ms C Botha (DP) noted that Cosatu should put new issues on the table and not issues the Committee is already aware of. Thus the Chair allowed Cosatu to address the Committee.

Cosatu address
Mr B Ntshalintshali, Assistant Secretary General, said as introduction Cosatu objects to the passing of the Eskom Conversion Bill as it stands and that they are opposed to the corporatisation of Eskom. If Government insists on proceeding, they have proposed various amendments to the Bill which will mitigate against the negative effects of corporatisation.

He said they have engaged in negotiations with the Department and it was unfortunate that these negotiations have not been successful due to a number of reasons.

Their concern was that the Bill opens the way for the privatization of Eskom through the selling of assets. They were concerned because electricity is a basic need in terms of empowering households and uplifting the standard of living of the people.

They acknowledge the work that Eskom has done in the past few years in providing affordable electricity but are of the view that if Eskom is put in the hands of the private sector it will not be in the position to deliver affordable services to poor communities and a country like South Africa needs such basic services.

The second concern is the proposed taxation of Eskom. This would impinge on its developmental role and could create pressures on the price of electricity. Eskom has indicated that taxation would raise prices. While the Department has said in the short term, the price of electricity would be affordable but after four years the price was bound to rise for variable reasons.

Government consultants have also projected that the price of electricity would increase up to 50%. Mr Ntshalintshali said in such a scenario poor people would not be able to afford electricity leading to the disconnection of electricity as is currently happening in parts of the country.

He pointed out that the Department of Minerals and Energy had requested a R1.2 billion budget for electrification development, they had only managed to get R600 million. He said it was Cosatu's great concern that the question of electrification should remain in the hands of the electorate and be governed by it.

Cosatu was proposing that the corporatisation of Eskom be stopped, the Eskom Conversion Bill be withdrawn and the Eskom Amendment Act of 1998 be repealed.

Mr Ntshalintshali said the proposals that Cosatu had dealt with the ownership of Eskom's shares, taxation, powers and duties of Eskom and memorandum and articles of associations.

Their proposal to the NCOP was that it should reject the Bill and initiate the repeal of the Eskom Amendment Act of 1998. Or, introduce changes to the Bill to meet their concerns, or, delay the process of the Bill to facilitate a proper political engagement. They also propose that the NCOP should hold both national and provincial hearings to allow proper consideration of this matter.

He said in their view it would be a serious blow to the country's democracy if the Bill were rushed through Parliament, particularly given its significance in terms of government's commitment to extend affordable electricity to all.

He concluded that this was an appeal they were making to the Committee in terms of how to take this process forward.

Mr Moosa (ANC) inquired whether Cosatu was aware of Section 75 of the Constitution which means that the Provinces do not have concurrent power with National Government. In that sense the hand of the NCOP is weaker than is usual with the Section 76 type of Bill in which there is concurrent power with the Provinces and the NCOP is obliged to negotiate and mandate through the nine provinces before any legislation could be passed. This Bill has been tagged Section 75 legislation, so the rules do not require them nor can they in fact get negotiated mandates from provinces. In other words for a Bill like this, they simply vote on a party political basis and the majority of those would carry the Bill.

Mr Moosa said the second point he wanted to make was that the Bill keeps 100% shareholding of Eskom in the hands of Government. This is the same way Government owned Eskom before through statutory means. And now it continues to own Eskom but through company law legislation.

He would like to hear from Cosatu whether its concerns regarding the structure of ownership had any impact on the way this Bill was structured because the general view is that "we need to modernise our public corporations within the context of a tough economic environment."

He said there are companies that want to come and capture markets in Africa and Southern Africa and if South African companies were not geared to secure these markets, the country would lose out. He said he was not sure whether Cosatu was aware of that argument.

Mr N Coleman (Cosatu) said they are aware that this was a Section 75 Bill and to that extent the mandate from Provinces is not part of the processes that the NCOP would follow. However, they also understand that the NCOP has discretion like the National Assembly to hold hearings.

He said no one disputes the fact that the corporatisation of Eskom lays the basis for the sale of Eskom shares and the memorandum of association speaks about the possible listing on the stock exchange and the selling of shares to domestic and foreign interests.

He said it is that very international experience that Mr Moosa spoke about that makes Cosatu so concerned because international experience has shown that the dynamics of profit maximization tends to dominate. It was interesting to see last Sunday's editorial in the Sunday Times supporting Cosatu's view on the dangers of privatization. Government had spoken about its intentions of partly privatizing Eskom including a sale of 30% of Eskom's productive capacity.
Corporatisation in that context represents a serious problem and should be seriously considered by Parliament.

In negotiations between Cosatu and the Department/Minister, Cosatu had put forward proposals to try and mitigate the effects of corporatisatio. These included empowering Parliament to make the decision on the question of sale of shares or assets. Unfortunately the Department failed to motivate that particular agreement at the
meeting with the Portfolio Committee.

Mr Coleman said they would like to address the Committee on the agreement they had reached with the Department and the motivation for these amendments in the finalisation of the Bill.

The Chair thanked Cosatu for the points that they have raised. He noted that the Bill would be finalised next week and during that time he hoped they would touch base with the Department to find a common ground.

Changes to the tabled Bill: briefing by Department
Mr L Montana (Director: Department's Parliamentary Services) said his colleague, Mr D Matsila, Director of Legal Services, would outline the specific changes that have been made to the Bill as the result of the input of public hearings, discussions and negotiations. The Ministry was convinced and satisfied they have listened to various concerns and that the Bill as its stands takes into account these concerns. This is a technical-specific Bill and so it does not address concerns regarding the price of electricity and the impact on the consumer. This Bill is simply to incorporate Eskom as a public company whose shares are owned by the State in terms of the Company Act of 1973. This Bill does nothing more than to modernise Eskom and to put it on par with other State-owned enterprises like Transnet and Telkom which operate as companies but are owned and controlled by the State.

Before taking the Committee through the amendments, Mr Matsila pointed out that Cosatu had made a valid point regarding point 3 of the Memorandum on the Objects of the Eskom Conversion Bill. Point 3 states:
"The benefit to the country of the unbundling of Eskom is that in the long run Eskom might decide to draw on the benefits of listing on a stock exchange and, in that event, citizens and foreigners are alike will be in a position to acquire shares in Eskom. Eskom can only be listed on a stock exchange if it is a company and Government is preparing for that eventuality, should it arise."

He indicated that point 3 was not the position of the Department and should have been taken out. He emphasized that it did not reflect the position of the Department but his, since he had drafted it and the Department should not be taken to ransom. It would be deleted.

He continued that the Eskom Amendment Act of 1998, which turned Eskom into a tax-paying entity, also mandated the Minister to incorporate Eskom into a company.

He posed a question regarding the purpose of the Bill, "What is it the Government seeks to achieve by the corporation of Eskom?" and answered that it seeks to give effect to the Eskom Amendment Act, to level the playing field between Eskom and its counterparts in the telecommunication (Telkom) and transport sector (Transnet), to position Eskom for global competition, and to enable Eskom to observe the principles on corporate governance.

The Eskom Conversion Bill seeks to incorporate Eskom as a public company administered in terms of the Company Act . The most appropriate route to incorporate Eskom was through the "deeming" route.

He mentioned some of the salient features of the Bill:
Section 2, Object of Act the interpretation of which was that upon incorporation the State will remain the sole shareholder or owner.

Section 3, Conversion of Eskom, exempts Eskom from certain provisions of the Companies Act because of its unique nature of having one shareholder and for that reason may not be in a position to comply with some provisions of the Companies Act.

Section 4 Effect of conversion seeks to deem Eskom as a company whose fundamentals will not be interfered with. The corporate existence of Eskom would continue, that any rights, liabilities and obligations that Eskom had prior to incorporation would continue, and any legal proceedings that Eskom may have been involved in would not be affected.

Section 5 Powers and duties of Eskom said that the powers conferred by this Bill to Eskom are in addition to those of the Eskom Act of 1987.

Section 6 Memorandum and articles of association of Eskom said every company that has been incorporated has to have a memorandum and articles of associations, must register with the Registrar of Companies, and it is the prerogative of the Minister to determine the articles of associations.

Section 7 Borrowings secured by Eskom's revenue and assets was intended to give comfort to Eskom lenders and creditors that if Eskom does not meet its obligations, it can be taken to court and the court can order that the price of electricity be hiked. He said this already exists in the current Eskom Act of 1987 to give comfort to lenders so as not to affect Eskom's credit ratings.

Section 8 Taxation of receipts and accruals of Eskom and subsidiaries says Eskom and any company that is associated with Eskom or in respect of which Eskom is a shareholder will not be exempted from the provisions of the Income Tax Act.

Section 9 Regulations empowers the Minister to make regulations for the achievement of this Act should it becomes necessary.

Section 10 Repeal of laws refers to a list of laws that would be repealed by the Conversion Bill such as the Eskom Amendment Act of 1998, the Eskom Act of 1987 and all legislation that still apply to the former TBVC states.

Section 11 Savings and transitional provisions points out in section 11 (1) that despite the repeal of the Eskom Act, anything done in terms of that particular act would still be done in terms of the Conversion Bill. In other words, he said, it is ensuring continuity.

Dr B Mothibedi (Eskom) added that Section 8 (1), (2), and (3) have already been implemented. All the sections that you see are in the Taxation Laws Amendment Act, 2000. This makes Eskom a taxpayer and in July 2001 Eskom's tax returns will be submitted. He pointed out that there is no correlation between the taxation of Eskom and electrification, adding that they have not paid any taxes to the State and they are not going to pay tax for the next five years.

To put it in perspective, Dr Mothibedi continued, for a capital intensive company like Eskom, it is talking about increasing its capacity for the years 2007 and 2008 which means Eskom would be entitled to asset losses and based on the asset losses it may not have to pay taxes to the State. He pointed out that, in terms of the Energy White Paper, there is supposed to be an Electrification Fund set up. When the Minister addressed the House, he said taxes and dividends would go to this Electrification Fund. He said the reduction from R1 billion to R600 million in the electrification budget has to do with the modernization of electrification and not because Eskom is a taxpayer.
Research done shows that the taxation of Eskom would not impact negatively on the consumer and Eskom would make sure that it did not.

The Chairperson asked what amendments had the Portfolio Committee made?

Mr L Montana highlighted the sectors that were amended as explained in the
previous minutes of the Eskom Conversion Bill.

Mr Moosa pointed out that there was a big difference between 'may' and 'must'. 'Must' is used to compel the Minister and 'may' is used to indicate that it is at the Minister's discretion. He asked the Department to consider the use of these words since there are instances where Parliament compels the Minister to do something.

He referred to the two views that were made, namely Cosatu's view that taxation will affect the price of electricity and the Department's view that the price of electricity is affected by modernization. The Department of Trade and Industry markets South Africa as one of the cheapest suppliers of electricity in the world to attract foreign direct investment. He asked where the price increase of electricity comes from and what was the role of the National Electricity Regulator?

The Chair observed that the Department wanted to do everything: it wanted to see Eskom competitive, it wanted to see electricity being affordable and thirdly it wanted to see that Eskom's financial sustainability is guaranteed. These issues are not supportive but conflicting and mutually antagonistic. He asked the Department to unbundle this. Why do they think these issues belong to each other when they are conflicting?

Mr Montana (Department) said the wording 'may' and 'shall' is not the Department's choice as they had suggested to the Portfolio Committee that the Minister "'must' take into account". He said Portfolio Committee and the State Law Advisors formulated the wording. The Department would not object to changes being made there. It was up to the Committee to take it up.

He said the Chair was correct in observing that the country's developmental role was competing with globalisation. He said it was how these issues were managed to achieve common objectives and the shareholder compact was creating that space. The shareholder compact was a developmental mandate Government gives to State-owned enterprises to deploy massive resources to achieve developmental objectives.

He pointed out that there was no relationship between the price of electricity and taxation and the notion that electricity prices increase because of taxation was not correct. Electricity prices have increased in the past and would continue to increase in the future due to a number of variables and not because of taxation.

Mr M Adams (Eskom) added that there are a number of reasons why Eskom was a low cost producer of electricity - some of these are because of productivity and efficiency gains. The challenge in the future was the change in the environment and the change in the needs of the country. In due course the country would need additional capacity and how that would be funded would depend on the increased costs. Eskom was planning for that while maintaining its position as one of the cheapest producers of electricity in the world to attract foreign direct investment. He used the example of the need to build a power station that would put pressure on for price increases rather than taxation.

Regarding the Chair's comments, Mr Adams said the point was to strike an appropriate balance between achieving competitiveness and affordability in a sustainable manner.

The Chair advised the Department to sit down with the State Law Advisers and look at the issues of 'may' and 'must' because they were giving a carte blanche to the Minister by using the word 'may' on the developmental role aspect.

Mr Matsila repeated that the Department does not have a problem with the use of 'must' and the Department's proposal had it captured as 'must'. The Portfolio Committee had debated whether the issue of the developmental role resides in the legislation or not. It had been pointed out that the developmental role issue was compulsory in terms of the shareholder compact and that thus it was not necessary to make it a 'must' in the Bill.

Ms Botha (DP) said there was confusion about the shareholder compact regarding the Minister's discretion. She thought the Minister must take into consideration the notion of universal access. What he did not need to take into consideration was affordability. She suggested the two words must be put into two separate subsections.

Dr Mothibedi said Eskom would not go to the government to ask for money to build a power station but would have to borrow it from the market and pay interest on it. If one says do not recover it from the price of electricity, from where was Eskom going to get that money? He said the only answer was through the price of electricity. That should be managed through putting money in the Electrification Fund. He noted that when Eskom was working on its models, they dealt with government consultants and none of them had projected price increases of up to 50%. He did not know from where that figure of 50% comes.

He said there was a difference between being a taxpayer and actually paying tax and added that Eskom has been a taxpayer since last year but since they are not paying tax, the tax is not a cost.

He observed that after the five years are up, it does not mean Eskom would start to pay tax but that they would have a new financial plan and new capacity. He said if this Bill was withdrawn Eskom would continue to be a taxpayer but for the next five years Eskom would not pay taxes. Hence taxes would not have an influence on the price of electricity, other things would.

Mr Moosa said the Public Finance Management Act might compel the Minister to enter into a shareholder compact and if not, this Bill needs to ask him to do so. Mr Matsila referred him to the definition of the shareholder compact in the Bill, which "means the performance agreement entered into between Eskom and the government of the Republic of South Africa", and Mr Moosa agreed that it was captured adequately in that definition.

The Chairperson pointed out the need to amend certain technical errors in the Bill and asked the Department to correct them when finalising the Bill for next week. In Clause 6 (2) he suggested they include the "memorandum of association" to "articles of association" to read "the articles and memorandum of associations of Eskom must …"

The meeting was adjourned.

This memo is intended to brief Members of Parliament on developments around the Eskom Conversion Bill and why COSATU is opposed to the Bill as it stands.

What does the Eskom Conversion Bill do?
The Bill essentially seeks to corporatise Eskom, turning it into a public company instead of a statutory juristic body as has been the case until now. Eskom would have a shareholding which could be sold at any time. The Bill also makes Eskom subject to taxation, unlike in the past where Eskom's revenue was channeled back into the electrification programme. The Bill would repeal seven pieces of legislation which have governed Eskom and other aspects of electricity until now.

Why is COSATU opposed to the Bill?
In summary, the two main concerns around the Bill are the following:
- The Bill opens to way for privatisation of Eskom through selling of shares.
Government has made clear its intention to partly privatise Eskom, including selling 30% of Eskom's productive capacity. The Memorandum on the Objects of the Act speaks about a possible future listing on the stock exchange and the selling of shares to domestic and foreign interests.

Electricity is a basic need. It is central both to empowering households and uplifting their standard of living, and to broader industrial and economic development. Eskom has made considerable progress in electrification over the past few years, but huge backlogs still remain. A further challenge is making the costs of electricity affordable to households - there is no point rolling out the infrastructure if the costs are so high that people just get disconnected. An entity which is owned and controlled by the state is best placed to provide affordable universal electricity. Economic logic, as well as experience from around the world shows that private companies are driven by profit maximisation and will not deliver affordable service to poor communities. Especially in a developing country like South Africa, a commercial or privatised structure is inappropriate to the meeting of basic needs. Furthermore, we are concerned that even before privatisation, corporatisation itself will shift Eskom's orientation away from affordable delivery of universal service towards a commercial orientation.

- The taxation of Eskom will impinge on its developmental role and put upward pressure on electricity prices.
Eskom has clearly stated in the past that taxation will raise electricity prices. The Department of Public Enterprises has also clearly stated that, while the effects of taxation will be buffered in the short term, after about four years it will definitely contribute to electricity price hikes. Government's own consultants have projected electricity price increases of up to 50%, for a range of reasons. This would make it more difficult to roll out electricity to all our people, and would lead to disconnections for households currently using electricity. While the Department of Minerals and Energy had requested R1.2 billion for electrification this year, only R600 million was allocated for this critical task.

Our other concerns arise from the proposed corporatisation of Eskom. These include the need for stronger parliamentary oversight and involvement in determination of the memorandum and articles of association of Eskom (Eskom's "constitution") and in Regulations in terms of the Act.

The importance of this issue for us also lies in its relationship to the broader state asset restructuring programme. COSATU has consistently argued for a strong role for elected representatives in this key area of governance, in the face of arguments from DPE that it is not the business of Parliament. Furthermore, it comes in the context of the proposed restructuring of the energy industry from which problematic issues are arising, and concern over the realization of government's commitment to provide free lifeline electricity to our people.
What has COSATU proposed?

We are opposed to the corporatisation of Eskom itself and have proposed that the Eskom Conversion Bill be withdrawn and the Eskom Amendment Act of 1998, which laid the basis for corporatisation, be repealed. Alternatively, we have proposed various amendments to the Eskom Conversion Bill aimed at mitigating the negative effects of corporatisation. In summary, the proposed amendments are as follows (specific wording has been put forward in various submissions/documents):
- On the ownership of Eskom shares, to amend section 2 of the Bill to ensure that any change in Eskom's shareholding structure or selling of Eskom shares or assets is subject to approval by Parliament and structures of the National Framework Agreement (NFA).
- In relation to the taxation of Eskom, to exempt it from taxation to enable it to fulfill its developmental responsibilities.
- On powers and duties of Eskom, to expand these in the Bill so that they are not just technical but set out a clear developmental role for Eskom in extending access to affordable electricity.
- Setting out a clear role for Parliament and allowing for stakeholder input in the determination of Eskom's memorandum and articles of association as well as Regulations in terms of the Act.
- Removing the power of courts to increase electricity prices.
- Building in protection for Eskom workers in the Act as well as reaching agreement (outside of the legislation itself) for their job security.

What is the history of the process?
The basis for this Bill was laid with the Eskom Amendment Act in 1998. This unilateral corporatisation of Eskom led to mass protest. The objection was twofold; firstly, that the Bill was introduced prior to discussions on government's energy policy and without being tabled at the NFA. Secondly, there was a concern that taxation of Eskom would squeeze resources available for carrying forward electrification, and that corporatisation was seen as a precursor to full scale privatisation. High level meetings involving the alliance leadership was convened to resolve the impasse. Ultimately, a compromise position was adopted allowing the bill to move to the next stage, including a provision that any restructuring proposal would have to be approved by parliament. The Alliance agreed to suspend the Bill at the NCOP stage pending negotiations on the matter. This agreement was however not implemented.

Further, then-Deputy-President Mbeki wrote a letter of reassurance to the COSATU leadership that government was not intending to privatise Eskom. Specifically of relevance to the current issues, the letter also stated that "the envisaged changes do not give the Minister the power to change the shareholding structure, for which the concurrence of parliament would be necessary" and further that "the proposed changes contained in the Bill will not adversely affect the commitment of Eskom to provide electricity at affordable prices". As discussed below, the recent developments have seriously undermined these undertakings.

The Eskom Amendment Act laid the basis for the Draft Bill which was published by the Department towards the end of last year. Government apologized to COSATU that the consultation process agreed to in 1998 had not taken place, and made a commitment that there would indeed be meaningful consultation between COSATU and government before any further processes around the proposed legislation.

Without going into detail on the various intervening processes and engagements, it suffices to say that DPE's approach was characterised by bad faith negotiations, backtracking, and duplicitous conduct. For example, at the end of last year the Minister made a commitment that there would be no further processing of the Draft Bill until bilateral engagement had taken place, after which the Department went ahead to amend the Draft Bill and publish it as a Bill without engagement having taken place. The Minister subsequently made a commitment that the Bill would not be processed in Parliament until engagement had happened. Despite this it went straight to Parliament without the agreed engagement. There have also been several engagements with the ANC Study Group.
What had the Department agreed to?

A series of bilaterals were held with DPE in an attempt to resolve the matter. The final COSATU-Departmental bilateral was held on the 29 May 2001 with officials of DPE, including the DG. At this meeting some further progress was reached on our concerns. While our major demands (either for the reversal of corporatisation or failing that substantial amendments to mitigate the negative effects of corporatisation) had not been addressed, it was agreed that the improvements which the Department had conceded to would be motivated by the Department at the following day's Portfolio Committee meeting. At the Portfolio Committee officials of the Department not only failed to motivate the amendments, but actually raised reservations with them to the Portfolio Committee. As a result, most of the proposed improvements agreed with the Department have not been incorporated into the version of the Bill passed by the Portfolio Committee on 30 May 2001.

The following points record what the Department had agreed to in terms of each of COSATU's concerns with the Bill, and what subsequently transpired on the issues in the final Portfolio Committee meeting on the matter (30 May 2001):
- Ownership of Eskom
The Department agreed to insert a clause ensuring that, should the executive intend to dispose of Eskom shares, such intention would need to be tabled in Parliament and the Portfolio Committee would hold public hearings on the issue, and consequently make a recommendation to the Executive. While the Department did table a formulation on this in Parliament, it fell short of what had been agreed on and Departmental officials failed to motivate the amendment to the Committee; as a result no such amendment has been included in the final Bill.
- Furthermore, it was agreed in principle to include a similar procedure for the intended disposal of Eskom assets, so long as "assets" could be adequately defined to refer to substantial assets. Despite this the Department failed to raise this in Parliament, to table any formulation, or suggest to the Committee/State Law Advisers any process for reaching an appropriate formulation.
- Powers and duties of Eskom
At an earlier stage in the engagement the Department had agreed to insert a clause in the section on powers and functions "that recognises the developmental role of Eskom and the need for universal access and affordable electricity to all the people." At the most recent engagement, however, the Department backed off from this and instead proposed a weakened formulation which the Minister would have to take into account in determining the shareholder compact and memorandum and articles of association. This was further weakened in the Committee deliberations, due in part to the Department's deliberate undermining of the proposals. The Minister is now not obliged to take developmental considerations into account but "may" do so.
- Determination of memorandum and articles of association
DPE agreed (at the meeting of the 29th) to include a requirement that articles of association must be gazetted for public comment by stakeholders and must be tabled at Parliament - itself a departure from what COSATU had proposed but an improvement nonetheless. As with the "powers and duties" above, this proposal was deliberately undermined by the DPE's presentation and hence a weaker version was incorporated into the legislation.
- Determination of Regulations
DPE agreed to include a requirement that Regulations must be gazetted for public comment by stakeholders and must be tabled at Parliament, an improvement although falling short of our proposal. Again the DPE failed to adequately motivate this proposal and indeed undermined it. The proposal has now been completely excised from the final Bill such that no public process for the determination of Regulations is provided for, despite the fact that other legislation (e.g. the Water Services Act) does include such a provision.
- Our concerns on the taxation and funding of electrification were not accommodated.
What will happen from here?

Given this history of repeated bad faith negotiations and breach of undertakings by the DPE, COSATU has severed relations with the Department, an unprecedented step which is indicative of the breakdown of trust. COSATU is requesting the intervention of senior ANC and Alliance leadership to resolve the impasse. COSATU has also adopted a programme of action, both specifically against the Eskom Conversion Bill and against privatisation more broadly. COSATU is filing a Section 77 Notice on Privatisation (including the Eskom issue) which, if the issues are not satisfactorily addressed, will lead to a two-day general strike. Furthermore, there are plans for more immediate action specifically on the Eskom Conversion Bill, including marches and pickets to Parliament and DPE offices.

However, given that the Bill must still go through the NCOP stage there is still a possibility of political intervention to rescue the situation. COSATU calls on the Select Committee on Labour and Public Enterprises and the NCOP to follow one of the following routes:
- reject the Bill and initiate the repeal of the Eskom Amendment Act of 1998
- delay the processing of the Bill to facilitate proper political engagement, or
- introduce changes to the Bill which will meet COSATU's concerns.
- Further, given the impact on people in the provinces of measures which may adversely affect the accessibility and affordability of electricity, we propose that the NCOP should hold hearings both nationally and provincially, to allow for the proper consideration of this matter. It would be a serious blow to our democracy if the Bill were rushed through Parliament, after such a problematic process, particularly given its significance in terms of government's commitment to extend affordable electricity to all.

For further information contact COSATU Parliamentary office on 461 3835 or [email protected]


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