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Thread: 2.2 COSATU’s Response to Eskom Multi Year Price Determination (MYPD2) Part 2

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    2.2 COSATU’s Response to Eskom Multi Year Price Determination (MYPD2) Part 2

    8. Funding

    COSATU reiterates its call for government to foot the bill for the completion of Medupi power station. Part of the 787bn budgeted for infrastructure must be used to help Eskom complete the construction of Medupi power station. We have also called for a special, once-off tax on corporations for this purpose. Government can also increase taxes marginally while maintaining the tax-free income threshold. This would ensure that majority of low-income workers and the poor do not born the excess burden of the tax.

    We have already indicated our view on privatisation and its impact on the economy through high electricity tariffs. Eskom is very keen to attract private investment, although it prefers this to be at project level; and it further indicates that it would not seek private equity into Eskom itself (and this is a welcome move). To be able to attract private equity, it contends that “tariffs should give lenders and credit rating agencies guidance as to whether Eskom will have sufficient internally generated net cashflow to service and redeem its debt”. By its own admission, Eskom acknowledges that “equity is the most expensive form of funding, which will have an adverse impact on tariffs in the long run” (Eskom’s MYPD 2, 30 Nov 27).

    Alternatively Eskom proposes to source equity from development finance institutions (DFIs) such as the IDC and DBSA, a move that will result in electricity tariffs not increasing sharply in the short term. However, Eskom believes that these DFIs will also need “a price path to provide them with an appropriate return on investment, whilst loans are being serviced” (Eskom’s MYPD 2, 30 Nov 28).

    COSATU believes that the DFIs have an important role in assisting Eskom in its capital expansion programme without causing electricity tariffs to increase steeply in a manner proposed by Eskom. We believe this is in keeping with clause 3.11 of the Framework which calls on DFIs “to place the promotion of productive employment and decent work opportunities at the centre of their investment mandates and to mobilise their available funds for the retention of employment and the creation of the largest jobs per unit of capital invested…”

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    What is COSATU's view on solving ESKOM's debt collection problem? This also has a significant impact on ESKOM's prospects of making timeous payments.

    In fact it may be a bigger issue than ESKOM's projected price path.
    The trouble with opportunity is it normally comes dressed up as work.

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    If Eskom hadn't offered the Township dwellers and squatters discounted electricity and if all the Municipalities paid their bills Eskom would also have some relief.

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