Analysis

The Blackout Scam- How Workers are Subsidizing Big Capital

By Workers International VanguardLeague

We republish an old article from 2007, which is still relevant today. We wish to emphasize that Eskom has sufficient income. There is no reason for any debt and there is no reason for any increase in tariffs for household users. Rather the central theme should be that the subsidy to big capital, who still pay less that 20 cents per KWh, should be ended. Currently househols pay over R1.60 per Kwh. Business uses 80% of electricity but only pay for 57% of the cost. Eskom should be placed under workers control, not privatised. We have updated some elements of the article, such as our email address. It’s lessons are still relevant. Unfortunately no one took us seriously in 2007. Hopefully the workers’ movement can wage an intense struggle to stop the privatization of electricity and for expanded subsidy to the unemployed, pensioners and working class. Essentially, it needs a political solution, namely the removal of the ANC-DA governments from power.

WIVL 15.2.2019

The Blackout scam- How workers are subsidizing big capital

It costs Eskom 16 cents per KiloWatt Hour (KWh) to produce electricity. It charges industry only 16 cents per KWh while the general public has to pay 44 cents per KWh. Large customers of Eskom like BHP Billiton, pay even less, about 12 cents per KWh. This means that the working and lower middle class are subsidizing the electricity cost of big capital. Residential use of electricity is only 19%, while industry uses about 80% of the overall total. But in terms of cost, residential users pay 43% while industry pays only 57%. In the past year BHP Billiton made a profit of R 6 Billion. Clearly the entire working class are subsidizing their profits.

How big capital benefits

Eskom plans to build 4 coal and 6 nuclear power stations, (creating a mere 200 jobs per station) despite there being cheaper and safer options available. Using older solar technology, a 70km by 70 km area in the North Cape desert could provide enough power for all power needs in SA. Spain recently built 10 000Mw of wind power in 3 years at 1/3 the cost of coal power. Wave power could provide 10 000 Mw continuous power in SA. Solar, wind and wave power require no fuel, unlike coal power which currently burns 120 million tons per annum. Who gains? General Electric, GE, benefits as they will get a substantial part of the R1300 Billion (R1.3 trillion) for the 10 power stations as well as the substantial ongoing contract for spare parts. The coal gang, Anglo American, BHP Billiton and Xstrata which controls the world’s coal reserves, will get unlimited profits from coal supply to power stations. Anglo will also benefit from Uranium supply. Anglo American has also benefited from the artificial shortages for minerals such as gold and platinum. During the blackouts last month, Gold rose more than $100 per ounce and platinum broke the record $2000 per ounce barrier. Anglo American declared an annual profit of over R80 Billion for the period to February 2008. Banks like Chase Manhattan, Citibank, which have shares in Hitachi, GE, Anglo American, also benefit. Citibank predicts a gold price of between $900 and $1000 for 2008. Despite making massive profits, big capital are now calling for more retrenchments, using the power supply problems as a cover. In effect, big capital wants to increase the rate of exploitation. The ANC government provides the perfect cover for their plans, having been bought off for R6 Billion through their Chancellor House investment company, which has a stake in the building of the new power stations. Reuel Khoza, an ex-CEO of Eskom is also co-chairing one of the ‘Independent power producers’ , Coal Investment Corporation, CIC, that will supply coal-based electricity (R80 Billion contract).

Manuel’s budget increases the burden on the poor

In the latest budget, the ANC government announced that an extra 2 cents per KWh will have to be paid by consumers. This is a further tax that brings the overall increase in electricity price to 19.5% (above what Eskom was demanding). The working class already buys the minimum electricity and thus will not be able to cut consumption by 10%. However, seeing that there is a decline in the world economy, it is easy for big capital to cut their use; they were probably going to do this in any case. Thus big capital would be exempt from the 2 cents levy, which means that a greater cost for building power stations will fall on the working and lower middle class. The setting aside of R20 Billion of the surplus for building new coal power stations also means that big capital continues to artificially profit from funds which could have been used to build houses, to train more teachers, to build more health services. The working class is, also carrying the burden of the government loan of R60 Billion to Eskom to help with these power schemes. [Capital does not really pay as they merely raise prices and pass the burden once again onto the working class]. The SA economy is not growing much and most of the growth does not require massive amounts of electricity. (How many KiloWatt Hours are needed to power the smile of a tour guide?).

The ANC leadership provides a mechanism for the profiteering of the multinationals from electricity

Last year contracts for 59 power stations in the US were either cancelled or put on hold. This is the backdrop against which the current trillion Rand campaign for power stations in South Africa, is taking place. Coal reserves were deliberately run down from 61 days to 1-3 days; Exxarro (Anglo American) supplied wet coal to power stations; Eskom managers decided not to keep power station spares on site. In addition, in 2001-2002 over 4000MW capacity was mothballed. These all contributed to the artificial blackout wave gripping the country. For major electricity users like Anglo American and BHP Billiton, a 14,2% increase in electricity amounts to less than 2c per KWh (still below cost), while the same percentage increase amounts to 6c per KWh for residential users. This means that the working and lower middle class will be paying for the new power stations that will be used mostly by big capital.

To add insult to injury, President Mbeki now argues for even further increases. Even if the electricity rate for big capital increases by 30%, they will be paying only 3,6c extra, still below the cost of production. The President has now redefined the meaning of ‘cheapest electricity in the world’ to justify the fleecing of millions of the working and lower middle classes to increase the rate of profits of the energy barons. We face annual increases of 20%+ for the foreseeable future. For the over 30% unemployed and millions of lowly paid workers, this ‘cheap’ electricity is not only beyond their means but will always be so. The Cosatu and SACP leaders offer no fundamental opposition to this human tragedy. Their new de facto slogan is “ ALL POWER TO THE MULTINATIONALS!”. But then again, such is the logical consequence of being in alliance with the point-men (and women) of imperialism.

Electricity everywhere (for big capital) but not a watt for the poor (those without power).

  •                      Scrap the new, coal and nuclear power contracts
  •                      Scrap the electricity price increases for the working and middle class, let industry pay the same rate as residential users.
  •                      Forward to a public investigation by the workers of NUMSA, NUM and Solidarity, into the blackouts.
  •                      All future power should be based on renewable energy
  •                      Down with privatization of Eskom!

Forward to working class power!

Workers International VanguardLeague,1stFloor, Community House, 41 Salt River rd, Salt River, 7925, ph021 4476777 or ph 0822020617 /Gauteng: ph 0823349564/E-Cape ph0732313328 , wivl@sn.apc.org (new address workersinternational@gmail.com)

References:

  1. Eskom Annual Report 2007 (citing average cost of electricity at 16c per KWh)
  2. www.eskom.co.za (original R80 Bn plans for electricity production and other basic data)
  3. 2008-2009 Budget Review gives average cost of electricity production as 22c per KWh.
  4. Anatomy of a catastrophe- Mail & Guardian Business 8-14 February 2008: Crisis one (Jocelyn Newmarch) – how coal reserves fell from 61 days to 1-3 days; Crisis two (Lynley Donnelly) on how BHP and other major industrial users pay 12c per KWh, the industry pays 16c and residential users pay 44c.
  5. email from Andrew Etzinger (of Eskom) to WIVL, confirming that industry users pay substantially lower rate than residential users “ large customers pay much less per unit of electricity than small customers.” (18 February 2008)
  6. ‘Short of the Mark’- Rejane Woodroffe – Budget supplement Mail & Guardian 2008- 2c levy will probably fund non-renewables. (M&G 22-28 February 2008)
  7. ‘Moosa in R38 Bn tender scandal (Stefaan Brummer; Sam Sole) on the Chancellor House (ANC) – Hitachi Africa link. (Mail & Guardian 8-14 February 2008)
  8. Stats SA Natural Resource Accounts for SA 1995-2000; Stats SA (P4141) Electricity generated and available for distribution (preliminary) December 2007. (for stats on electricity usage by industry and residential users).
  9. Information on the dominant status of Anglo American, BHP Billiton and Xstrata in coal mining and other mining ; and their role in conflict around the world http://www.business-humanrights.org/Categories/Individualcompanies/C/CerrejnCoaljointventureAngloAmericanBHPBillitonXstrata
  10. SA waves could generate up to 10 000MW http://www.environment.co.za/topic.asp?TOPIC_ID=1755
  11. renewable energy Spain with current capacity aim for 0 – 20 000MW capacity from 2005 -2010 (including costs). They already achieved 15 000MW capacity by 2007. http://www.aeeolica.org/doc/NP_080117_Espana_supera_los_15000_MW_eolicos.pdf
  12. Renewable energy EU (including stats on Spain) http://www.energy.eu/#renewable
  13. Eskom looks to the rising sun Yolandi Groenewald on 70 km by 70 km square of solar panels to power SA. http://www.mg.co.za/articlePage.aspx?articleid=333261&area=/insight/insight__economy__business/
  14. Eskom and Exxaro agree on coal supply (40 years) for Medupi http://www.exxaro.com/content/media/newsReleasesNews.asp?Current_ID=206
  15. Anglo American 2007 profits up to $10.1 Bn. Feb 2008 http://www.fin24.com/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-24_2274004
  16. Anglo has at least 11% stake in empowerment group Eyesizwe Coal http://www.angloamerican.co.uk/ourbusiness/thecompany/geographiclocations/africa/
  17. Anglo American has a multiplicity of strands of control over Exxaro http://www.miningweekly.co.za/article.php?a_id=78559
  18. Platinum price goes ballistic (and gold also affected)- during power outages http://www.marketoracle.co.uk/Article3757.html
  19. Citibank forecasts gold price to test $1000 per oz in 2008 http://www.theamericanadvisor.com/view-article.html?n=217#20
  20. Reuel Khoza link with Coal Investment Corporation (link with Anglo and other big capital) and the power station to supply Eskom http://www.taucapital.com/_resources/CIC%20DECEMBER.pdf
  21. www.eia.doe.gov/oiaf/ieo/electricity.html for the US govt International Energy outlook 2007- Electricity chapter on the eia site is also the track record from 1980 to 2005 and the projections up to 2030 for energy capacity. This also shows that SA electricity capacity was 45 000 Mw in 2001.
  22. GE and Hitachi cross ownership www.hitachi.com/New/cnews/f_070516b.pdf
  23. for some information on shares in Hitachi www.en.wikipedia.org/wiki/Hitachi – this shows the shareholding of NATS CUMCO – which is really Citibank; as well as Chase Manhattan.
  24. Crime, Law and Social Change Journal (1977): Southern African Contradictions Part 1, the role of US-based Multinational Corporations (MNC’s). Ann and Neva Seidman. Vol 1, No 3, July. ( on the role of Citibank , Chase Manhattan and Anglo American in the super-exploitation of the working class in Southern Africa) http://www.springerlink.com/content/k74q2v28m635u910/
  25. http://www.sourcewatch.org/index.php?title=Category:Cancelled_coal_plants for the 59 coal plants cancelled or put on hold in 2007 , of which at least 13 were orders from GE. Note that IGCC is GE technology project (Integrated Gasification Combined Cycle)
  26. http://www.mcilvainecompany.com/brochures/UtilityE-AlertHeadlines/UtilityE_Alert824Headlines.htm coal power cancelled and orders go ahead in other parts of the world
  27. http://www.economist.com/business/displaystory.cfm?story_id=10145492 economist on the ‘projections’ but also reflecting the cancellations of coal power
  28. for more information ON GE- their link to the sub-prime market and other financial wheelings and dealings http://www.innercitypress.org/ge.html
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One Comment

  1. The sad part is the “denialists” we live with, who don’t inform themselves who gulp down the lies they are fed on a daily basis !

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