Eskom’s class agenda

There never seems to be a dull moment when it comes to Eskom.


There has been load-shedding; huge managerial salaries; and scandals around tenders and coal-supply costs. There has also been Eskom’s claim that it faces a funding short-fall and that it needs massive tariff increases.


Then there have been sections of the ruling class again clamouring for its full privatisation. The ANC too says it is thinking of selling equity in Eskom to state-owned and private pension funds.


While all this had been happening, selling electricity has remained very profitable: Eskom in the last year recorded a R 7 billion profit. Yet in this context too, the working class – and the black section in particular – has been facing cut-offs, pre-paid metres, and tariffs up to 400% higher than those paid by some corporations. 




To fully understand why Eskom has such issues and why it really does not serve the interests of the working class, you have to look at its history including who has controlled it, for what purposes, and in whose interests, which includes looking at the role the state plays in society. Looking at this too reveals why privatisation is not the solution; but neither is control by state bureaucrats.




From its outset the state has owned and controlled Eskom and it has always used it to further the interest of various sections of the ruling class, especially under neo-liberalism. To understand how this is possible it is vital to understand that states are not neutral. States, class rule and markets are deeply tied together. States throughout history have been bound up with class rule, and they have always been controlled by some privileged class to serve their own interests. This remains the case in South Africa today.


Thus the South African state furthers the interest of the ruling class today – white capitalists, black economic empowerment elites and a black elite centred around the state itself. The state does this in a number of ways. It guarantees that the ruling class owns the means of production by protecting capitalist and state property rights and assures the oppression of the working class though ideology and if need be violence. It also intervenes to ensure a general climate that aids accumulation by the ruling class, which especially in the neoliberal era extends to assisting members of that class very directly.


This is where Eskom too comes into the story. 


Eskom was established by the state in 1923 and ever since its role has been to assist sections of the ruling class to accumulate wealth – to the detriment of the working class.


How has it done this?


From start Eskom has ensured that coal mining corporations have been given lucrative deals for their low grade coal. Many established companies – who benefitted from this under apartheid – still have contracts that stipulate that Eskom will cover their production costs and guarantee them a nice profit. It is not surprising; therefore, that Eskom has extended such deals to companies with black economic empowerment connections by buying coal at well above market prices. 


On the supply side, there too Eskom assists large corporations. Eskom was established originally to supply the railways with cheap electricity – to assist accumulation generally for corporations. This became even more direct after 1948.


It was in 1948 that the state through Eskom nationalised the private companies that were selling electricity to the mines – demonstrating nationalisation does not equal socialism. This was done at the behest of AngloAmerican, who was unhappy with the high prices and inefficiencies of the private company – the Victoria Falls and Transvaal Power Company (VFTPC) – that supplied it with electricity at the time. 


Ever since this, Eskom has been supplying extremely cheap electricity, including through externalising the costs of pollution, to the largest companies in South Africa: intervening in the market to subsidise their profits. Today, companies like BHP Billiton are reportedly still supplied electricity at below cost. It is such companies too that use the bulk of electricity. 


For doing this, Eskom bureaucrats have always been well rewarded: the R 60 million that the top 10 Eskom managers got last year was no exception.


Neo-liberalism made it worse


Under neo-liberalism, though, things have got worse. States under neo-liberalism have intervened in markets and society in new ways to benefit the ruling class. Opening up new areas for profits for corporations through initiatives such as privatisation, outsourcing or public-private partnerships has been one way. Bailing out large corporations has been another.


Eskom has played its role in this too. From 1987 Eskom has become more and more neo-liberal, and under the ANC led state this has intensified. Under this, outsourcing has become widespread and very lucrative for contracted companies. Initially outsourcing contracts, beginning in the late-1980s, went to capitalists with links to the National Party; after 1994 many have gone to companies with links to the ANC. Thus, the current scandal around Lephalale Site Services and RoyalMnandi Duduza receiving catering contracts for R 1.4 billion is the tip of the iceberg, and is in reality part of how the state has used outsourcing to benefit capitalists under neo-liberalism.


Under neo-liberalism, the South African state has also opened up the electricity generating sector to private enterprises in the form of independent power producers (IPPs). This came about when plans, in the mid-and-late 1990s, to fully privatise Eskom stalled (it was during this period of planned full privatisation, when the state stopped building new Eskom power stations, that is also the source of the current load-shedding crisis).

Instead IPPs were introduced. Eskom pays high rates to IPPs for electricity and under this these companies have become very profitable. This has seen coal mining companies now also applying to be IPPs: they plan to build power stations that will use discard grade coal and be highly profitable given Eskom will pay high prices. As more IPPs come on line, expect prices for households to rise: after all profitability is the end goal and contracts with Eskom are cash-cows.


Sections of the ruling class wanting Eskom fully privatised are taking heart from the profitability of IPPs too along with the huge profits Eskom itself has made since 2001. The full privatisation of Eskom, should it happen, though will only make the situation of high prices for households worse – as already shown by IPPs.


If people are, therefore, looking for reasons why working class households are milked by Eskom, while it claims it faces a funding short-fall, they should look no further than Eskom’s role in subsidising the profits of large companies through inflated coal prices, ensuring corporate profitability through cheap electricity, high managerial salaries, lucrative outsourcing contracts and costly power from IPPs. 



So the roots of Eskom’s scandals lie in the fact that it is controlled by sections the ruling class in the interests of this class; which includes too attacking the working class using it as a source of profit though astronomical tariffs. The ongoing struggle by the working class to resist high prices and cut-offs is vital beginning in blunting this class agenda.