Scopa places Eskom on its priority 'watch list'

Parliament's Standing Committee on Public Accounts on Thursday said the construction of Eskom’s multi-billion rand Medupi power station was fraught with poor planning from inception. The oversight body said it had taken the decision to keep a close eye on the power utility.

The statement followed oversight visits by the committee to two of Eskom's newest and costliest coal-fired power plants, Medupi and Kusile. The stations have faced numerous challenges, including cost overruns and allegations of structural defects.

Medupi, located near Lephalale in Limpopo, was initially set to cost R79bn, but costs have escalated to R146bn. Kusile was budgeted at R81bn, but the figure has shot up to R161bn, said Scopa.

Corruption evident

"It is evident that corruption has taken place. There is no running away from that, if you look at the cost escalation," chairperson Mkhuleko Hlengwa told journalists at a briefing at Eskom's headquarters at Megawatt Park. 

The committee first visited Medupi and then proceeded to Kusile before meeting with the Eskom management, which Hlengwa described as "very open".

The purpose of the meeting was to gain a better understanding of cost escalations at the power stations and problems that led to power outages early in the year.

Critical

Hlengwa said that, based on the committee's assessment, the projects were rushed and "set up for failure from the word go". He added that the committee had taken a decision to adopt Eskom as one of its  "critical focal points… until we bring all matters to a logical conclusion."

The struggling power utility is battling crippling debt levels. In July reported a net loss after tax of R20.7bn for the 2019 financial year, with debt sitting at R440bn, according latest figures.

The construction of the two coal-fired power stations was envisaged to ease Eskom's power supply challenges. Work at Medupi started in 2007, but the facility - which will have an installed capacity of 4 764MW - is now only expected to be finished in 2021.

Kusile, meanwhile, is forecast for completion between 2022 and 2023, nearly 15 years after the project began.

In a statement issued after the visit, Scopa said: "Scopa appreciates the seriousness on Eskom’s part of understanding the importance of the work of the committee... Eskom incurred a loss of R2.3bn, R19.6bn in irregular expenditure and a debt of R380bn in 2017/18. Scopa wants to see this situation turned around. This is why it saw it fit to start this journey with Eskom."

Energy expert Chris Yelland told Fin24 he understood that Scopa had been given outdated figures regarding the cost of completion, and that the real figure was much higher.

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