"The only way to restore and improve power supply of Eskom over the long term is to restore the profitability and sustainability of the various processes of how electricity is supplied," says Fanie Brink, independent agricultural economist.
This process will require the thorough application and management of the basic economic and technological principles, as Eskom's profitability and sustainability to provide electrical power over the long-term is driven and created by two basic principles.
Firstly, by the price ratio between the changes in the price that Eskom pays for its coal and the changes in the price changes it receives for its electricity, which is the single biggest factor which determines its profitability.
Secondly, the efficiency with which coal can be converted into electricity that needs to be improved by the application of the best and latest available technological processes. In other words, how many tons of coal are needed to produce, for example, 1000KW of electricity and how can the efficiency be improved to produce more electricity with the same amount of coal or the same amount of electricity with less coal.
The announcement by the Public Enterprises Minister, Mr Pravin Gordhan, that external engineers will be appointed to look at Eskom's manufacturing, transmission and distribution processes separately should be welcomed.
"However, there is no other long-term solution to providing sufficient electrical power than to improve Eskom's profitability and sustainability. If these two basic drivers of profitability are not properly applied and managed, all the other factors involved in supplying electrical power are in fact irrelevant.
The same economic and scientific principles are equally valid and applicable to all other business enterprises in the primary, secondary and tertiary sectors of the economy,” according to Brink.
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Bothaville
12 February 2019
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