If there’s one epithet that befits Mteto Nyati, chair of South Africa’s power utility Eskom, it is that he is fearless in a way most politicians never could be. An engineer who has held serious roles at MTN, Microsoft and Altron, Nyati was not born for the sort of diplomacy that sugarcoats hard truths and runs for cover at the first sign of a lifestyle audit.
Recently he has critiqued the politicians who appointed him, attacked cadre deployment as a policy that “cost us dearly”, complained that “appointing people who can’t run a spaza shop to run a city is not transformation”, and launched a broadside at the “elite” in business, including Business Leadership South Africa, who “believe the rules that govern the rest of us do not apply to them”.
Nyati is clearly captured by no-one. So it is commendable that President Cyril Ramaphosa nonetheless appointed him to Eskom’s board in 2022 despite his propensity to speak out.
In light of all this, it was perhaps no surprise that last week, during the Joburg leg of the FM’s “Uncomfortable Truths” dialogues hosted by Citadel, Nyati wasn’t shy to confront Eskom’s elephant in the room: its tariffs.
“The prices of electricity are not where we want them,” he said. Reducing the relative drain on ratepayers, he said, is Eskom’s new priority, now that it has fixed the supply crisis — goodbye to the dreaded blackouts — and has produced its first profit in some years.
“The next step is to make sure that we’re affordable so we don’t lose some of the customers that will choose to leave us. And then, it’s about powering for growth,” he said.
Of course, there’s no shying away from the tariff question. Over the 30 years since 1996 electricity costs for households have risen 2,180%, compared with inflation of 410% — 5.3 times faster — according to energy company PowerOptimal. It’s no comfort that water prices have risen faster.
And this is hurting. Shelton Damon, a casual worker from the West Coast who spoke to GroundUp journalists, said: “Electricity is very expensive, so we can’t afford to cook or heat water every day. R50 used to buy us 50 units, but we get only 18 units now.”
Another pensioner, Soweto’s Ramolefe Mokwena, told GroundUp that he spends more than half his R2,300 monthly income on electricity. “My two children are at university, and I can’t buy enough food for them. It is painful to be unable to buy food for your children.”
CEO Dan Marokane is well aware of this. “We have heard South Africans clearly: double-digit electricity price increases are unaffordable,” he wrote in Eskom’s annual report. “We are committed to keeping increases within single digits by relentlessly pursuing efficiencies.”
The way it will do it is by slashing costs — and Nyati says Eskom is now laser-focused on this. “We have given the leadership team a target of taking out costs: R112bn by 2030. And they have achieved their first-year target of R26bn.”
Nyati, of course, appreciates the need to “change ourselves” to improve the country.
“For example, when we say we want R112bn of cost savings, some of those savings will come from reducing the number of people who work for Eskom. Now that’s painful, but it’s got to be done,” he says.
Clearly, Nyati has no intention of laying off Eskom’s entire staff of 43,274. But 20 years ago, Eskom had 32,000 employees, who delivered an average of 7.4GWh each. Today the utility employs a third more people, but efficiency has fallen to 4.7GWh each.
Trim the R50.4bn staff costs, and the imperative for eye-watering tariff hikes eases.
So, once these costs are gone, does that mean South Africans can expect tariff cuts?
Well, not exactly. But it does mean hikes will be less punishing.
“We want them to be as close as possible to consumer price inflation,” said Nyati. “We’ve given ourselves a target of no longer having double-digit price increases in future — but that could mean increases of 9.9%.”
Municipal debt
There is, of course, one variable that could affect how this goes: the R120bn owed to Eskom by municipalities, which grew 17% last year. When these municipalities don’t pay what they owe, Eskom has to hike tariffs to cover the delinquents.
Perhaps, rather than protesting outside Megawatt Park, people should be holding placards outside the homes of Vusi Nhlapho, the mayor of Emalahleni (which owes R13.6bn), Thanduxolo Khalipha, the mayor of Matjhabeng (more than R6.9bn), Hassan Mako, the mayor of Emfuleni (R5.3bn) or even Dada Morero, the mayor of Joburg, which, until August, owed R5bn.
At Eskom’s urging, the National Treasury has now hauled out the big guns: halting payment of the “equitable share” of funds due to cities until they pay their electricity debt. This is tough for politicians running municipalities, who fear collecting debts might cost votes.
But, Nyati shrugs, leadership often requires doing unpopular things.
This is especially since South Africa is partly where it is, he says, because leaders have avoided the “hard choices” for too long. In recent days, he has described the country’s economic underperformance as not an accident but the result of intentional choices.
“We talk endlessly about creating an enabling environment for business and investment, both local and international. Yet too often the actions do not match the rhetoric. Red tape, inconsistent policy and slow decision-making continue to choke investment,” he said.
The first part of his mission to recalibrate Eskom to avoid blackouts succeeded far better than anyone foresaw. Don’t expect him to shirk any of the “hard choices” needed to ensure that the next phase — ensuring electricity tariffs don’t crush residents — succeeds too.
