South Africans should brace for further electricity tariff hikes to fund Eskom’s proposed turnaround and the unbundling of the organisation into three separate entities.

That’s the word from President Cyril Ramaphosa, giving last night’s State of the Nation Address.

He explains that new boards with credible, appropriately experienced and ethical directors, have been appointed at Eskom, Denel, Transnet, SAFCOL, PRASA and SA Express. The Presidential SOE Council will provide political oversight and strategic management in order to reform, reposition and revitalise SOEs.

“We want our SOEs to be fully self-sufficient and be able to fulfil their development and economic role,” he says. “We have the task and the responsibility to safeguard, build and sustain these key institutions for future generations.”

Security of energy supply is an absolute imperative, Ramaphosa adds. “Eskom is in crisis and the risks it poses to South Africa are great. It could severely damage our economic and social development ambitions.

“We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay.”

He says Eskom has come up with a nine-point turnaround plan which government supports.

“In line with this plan, Eskom will need to take urgent steps to significantly reduce its costs. And it will need more revenue through an affordable tariff increase.”

Ramaphosa adds that Eskom will embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings.

“This will ensure that we isolate cost and give responsibility to each appropriate entity. This will also enable Eskom to be able to raise funding for its various operations much easily from funders and the market.

“Of particular and immediate importance is the entity to manage an independent state-owned transmission grid combined with the systems operator and power planning, procurement and buying functions.

“It is imperative that we undertake these measures without delay to stabilise Eskom’s finances, ensure security of electricity supply, and establish the basis for long-term sustainability.”