In late June, the coldest part of the Southern Hemisphere winter, the power went out in South Africa. For as many as eight hours a day, right into early July, traffic lights went dark, factories and offices shut down, and meals had to be served cold.
Eskom is “a litmus test of the ANC’s ability to deliver basic services,” says Shridaran Pillay, Africa director for Eurasia Group. “You can’t grow an economy without power and without being able to spend on infrastructure.”Founded in 1923, Eskom rapidly built hydro and coal-fired power plants, spurred by the needs of a gold mining industry that was the world’s largest. In the 1970s the company began building a fleet of coal-fired plants that operate to this day.
“When I exited in November 2009, the debt was dramatically less,” remembers Godsell. “For a long time, Eskom bonds had achieved a lower risk [premium] than sovereign bonds.” The projects were mired in allegations of corruption, which in some cases boosted costs. Hitachi Ltd. paid $19 million to settle US Securities and Exchange Commission charges that it made “improper payments” of $6 million to Chancellor House, the investment arm of the ANC, with whom Hitachi had formed a partnership to win contracts to install boilers at the plants. In a separate agreement with South African investigative authorities, ABB Ltd. agreed to return 1.
Local companies “got access, and in the process they were treated differently by Eskom under political pressure,” Mondi says. “You got the beginning of Eskom’s balance sheet being eroded.”In 2015, Eskom and then-Mineral Resources Minister Mosebenzi Zwane allegedly pressured Glencore to sell mines supplying the utility to a company owned by the Gupta family, who were friends with former President Jacob Zuma. Zuma’s son Duduzane had a stake in the company.
ANC Chairman Mantashe, who’s also South Africa’s energy minister, has been particularly critical of the company’s explanations. “Let Eskom blame everybody and anybody,” Mantashe says. “Let them hide behind everybody.” He has suggested starting a second state-owned power company to rival Eskom.