21 March 2008

Eskom and the art of spin

Has anyone out there seen the movie, "Thank you for Smoking"? It gives quite an interesting and amusing slant on the way spin doctors are able to manipulate the truth. When I look at the electricity crisis in this country and the response of the Eskom executives to it, then I can only conclude that they have the art of spin perfected. They even have the President singing their tune.

Their pronouncements have been proved to be less than truthful on more than one occasion. The first one being the stuck record, which for many months said we did not have an energy crisis. Only when the country was plunged into darkness for the umpteenth time did they admit it.

The other tune is, “The days of cheap electricity are over for South Africans”. Whoever said our electricity was cheap in the first place.

What they are rally saying is that we must pay more get Eskom out of the situation, their gross incompetence and mismanagement of the electricity supply, has put us into.

What about the other tune - “South Africa has the cheapest electricity in the world; it is time our prices came in line with world prices”. Maybe that is not so surprising, since we have amongst the biggest coal reserves in the world, which are on the doorsteps of the big coal fired power stations.
This is the same sort of logic that would say that the people of Saudi Arabia pay too little for their petrol and should start paying the same price as motorists do in London.
The quality of this photo is not great, as it was shot with my cell phone,
but then it is symbolic of the quality of the service provided by Eskom
If the powers that be, believe our power is too cheap then why not charge our neighbours the same price they charge local users? Yes the neighbouring states pay less for Eskom’s electricity than we do – not a problem for Eskom they just make up the deficit from local consumers.

When Eskom took their “well conceived” decision to cut the power to the mines, they said it was because there was not enough electricity to go around. The real reason was that they supplied more power to our neighbours in January and therefore had to cut power to South African users.

The result of this act of stupidity was that the Rand took a tumble and never recovered – that has also had repercussions for the whole economy. There was a knock on effect on commodity prices that are linked to the dollar. This includes petrol, maize, wheat, coal, etc etc. And of course the inflation rate jumped ahead like a runner from the starting blocks.

On 17 February I wrote, “Given the fact that Eskom’s appeal to consumers to achieve a 10% reduction in power consumption, has been exceeded, it means that income wise they will be back to square one – do the maths. So where will the money for capital projects come from now? What will the next surprise be?”

Here we have it, Eskom is now calling for a 53% increase in the price of electricity – oh yes 53%. And it is supported by the government. This just reinforces my belief that those who are managing our electricity supply are grossly incompetent. How can you get your projections so wrong, that you go from a demand for an 18% increase to one of 53%?

They have said that one of the reasons is because the price of fuel and coal has risen, a factor to which Eskom’s poor performance has significantly contributed.

The reality is that consumers were asked to save 10% on their electricity consumption, which they did and are now to be penalized with higher prices.

What about the Eskom spokeman who made the claim on the radio last night that by increasing the price of electricity by 53%, they would benefit the economy as a whole and that this would result in growth. You see, our electricity is so cheap that it is not attractive for the private sector to invest in the electricity supply business. Give me a break! Eskom has the monopoly, there are other barriers to entry that far outweigh the cost of putting up new power generation facilities.

In the real business world you can’t come up with a bunch of feeble arguments to push up your prices by 53% - if you did, your business will shut down in no time at all. If you get into a crisis then you manage it in a way that ensures that the business remains a player in the market place. This happens through sound leadership - you cut costs, you innovate, you plan properly and execute your decisions effectively. In other words apply logic and sound management and business principles. I guess this does not apply to a monopoly.

A private sector executive who ran his business the same way Eskom is being run, would have been without a job a long time ago and would certainly not have been paid a fat bonus.


Anna said...

Oh Max-e I am not in favor of big corporations. Still having trouble to adjust to recent increases in gas prices, just in time we got bigger car. Thanks for sharing this story. Anna :)

mrsnesbitt said...

Our fuel prices are up too as well as energy! We are looking into wind power!

LiD said...

53%! That is unbelievable. Who owns Eskom? In Australia they are talking about putting up electricity prices and we are also a large coal producer which isn't anything to be that proud of anyway. Typically the mining companies are not Australian owned so the profits go elsewhere. I really would like to see green alternative companies out pacing these corporations and leaving them in their own dust.

RuneE said...

In Norway we follow your argument of paying the same (at least) as the rest of Europe for petrol and electricity, even though we have as I well have said large resources of most kinds of energy.

There are several reasons for this, one is called globalisation (the most important for the politicians I think), environment (coal, oil and gas and CO2 etc don't mix too well without a thorough clean-up) - and well, there is the old question of getting the most money out of it for the least use of common sense and investment.

Which all leads to a downgrading of the national grid and less maintenance. It all costs money and reduces the overhead.

The term infrastructure is about to loose its meaning.

Max-e said...

Anna I agree with you on this one. Fuel prices have gone absolutel crazy. Thet have more than doubled in price over the past year, thanks to the increase in the price of crude oil and the ever weakening Rand

Max-e said...

Denise if only Eskom would look at the obvious alternatives like wind power. They are fixated on nuclear power.

Max-e said...

LiD Eskom started off as a state owned power company and may as well still be one, because of their monopoly on the supply of power. In the 1980's they convinced many municipalities to shut down pefectly viable power stations and buy their power. This was done and despite warnings from organised industry, to keep the old power stations as backups, they were decommissioned.
As for coal, it seems ridiculous to me that the price is linked to the US$ - we mine it here so why not pay what it costs to mine it. I also agree that we should see the "green" alternatives.

Max-e said...

Runee, it is no wonder that the Third World is fighting globalization and that the activists are taking such a tough stand against the machinations of the G8.
The result is vast profits that benefit a few and then of course the power monopolies that result in mismanagement, poor planning and inefficiencies.
I am certainly going to look at alternatives to limit my reliance on the electricity grid.