OUTA welcomes Eskom’s 'Own the Bakery' decision

The Organisation Undoing Tax Abuse (OUTA) believes that by investing in mines that produce the specific coal required by each power plant, Eskom will have greater control of the supply prices and in turn this will impact on the price of electricity forked out by every day South Africans.

OUTA was always concerned at Eskom’s decision taken by previous CEO, Brian Molefe, who opted to take the energy giant away from control and ownership of its primary energy supply, by disinvesting in the coal mines that supply its power plants.

“When you are a massive consumer of the product, you need to exercise substantive control over the producer,” says Ronald Chauke, OUTA’s Energy Portfolio Manager. “It is suicide to disinvest in coal production and put the country’s cost of energy supply in the hands of others.”

OUTA calls on Eskom to reverse the poor decisions made by previous leadership at Eskom. This doesn’t mean that Eskom needs to pump significant capital expenditure into coal mining. Instead, it means that Eskom can enter into long term coal supply contracts to responsible and sustainable mining companies, who will be able to borrow against those contracts and invest in coal production and off-take volumes.

“If you eat all the bread, you better own the bakery, lest the bakery increases your cost of living whilst starving you to death,” says Ben Theron, OUTA’s COO. “It was obvious to us that Mr Molefe and his colleague at Eskom did not have the best interests of the electricity consumer at heart with their poor decisions. By pursuing this ill-conceived strategy , Mr Molefe has made a handful of coal suppliers very rich, whilst making the entire country a lot poorer and put the energy grid at risk.”

OUTA believes that while Eskom’s new leadership is making the right noises in some areas, it needs to move faster to undo the overpriced and corrupt coal contracts of the past, whilst also reducing its manpower overheads, benchmark with most efficient operations and improve its overall productivity.