Madam Deputy Speaker, the global financial crisis is working its way through economies across the world. This has presented an opportunity for commentators to conclude that this event exposes fundamental flaws in the market system and that increased government control over economies is required to avert similar events in future. The reality is, however, that regulatory failure and the failure to implement the principles of good governance lie at the root of this crisis. This event demonstrated the role of government as a lender of last resort and a participant in the economy that intervenes when it is necessary to restore balance to the economic system when it experiences disequilibrium. Who would balance the system if government were the dominant player?
After several outages, resulting in relatively minor disruptions to our economy and daily lives, the magnitude of the crisis at Eskom reached startling proportions in January when our mines stopped operating. When the golden heart of our economy stopped beating, it was obvious to all observers across the world that the electricity supply in South Africa was unreliable and that doing business in South Africa presented increased risk. The system had failed. Our economy has paid a heavy price for this failure.
If Eskom had been a private monopoly, it would have been necessary for government to intervene to ensure that the economy was not damaged beyond repair because it had been starved of energy. The question would have then arisen as to why Eskom held a monopoly. That question should be asked now. If the potential damage to the economy is high enough, government has no option other than to intervene.
Eskom is not just any company. We rely on Eskom to assure our electricity supply. It is insurance for our economic growth and it needs to be financially sound. Our economy cannot withstand continual failure at Eskom. Effective regulation and good governance are crucial.
There are several ways in which companies can access capital. Whatever source is chosen, there will be a price to pay. Fortunately for Eskom, government will be providing R60 billion over the next three years - R10 billion in the current financial year, R30 billion next year and R20 billion the year after. Eskom needs to raise a further R283 billion.
The terms of agreement are very soft. The loan is subordinate to other debts and it is regarded by rating agencies as equity. Interest is around 9,4% and needs only to be paid when Eskom is in a sound financial position in terms of criteria set by Treasury. The capital sum is only payable in the year 2030.
The people will pay for this cash injection, and they will pay twice. Monies now advanced to Eskom will be taken from the public purse and Eskom will be required to repay it along with other possible loans. The only way that Eskom can repay the loan is to ensure that its pricing generates sufficient profit to fund the repayment. This profit is likely to be generated from price increases.
This subsidy to rescue Eskom also carries an opportunity cost of crowding out a meaningful investment in innovative and technological development into new forms of energy generation, especially renewable energy. The full cost of the nuclear programme is not clear.
Senior management cannot expect to continue to enjoy the benefits of corporatisation without being held accountable for their failure to deliver. The R60 billion must not find its way into their pockets. The business model requires reconsideration. Eskom is not an attractive investment option.
In the absence of other funders, the DA supports the Bill. Thank you. [Applause.]