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EDI Holdings was set up to facilitate the restructuring of the
electricity distribution industry and to create regional electricity
distributors (REDS).
The municipalities in South Africa have largely been united
against the formation of independent regional distributors, claiming
that the distribution industry is inefficient and fragmented anyway.
Distribution of electricity is fragmented between Eskom and
187 different municipalities throughout the country. Under the
restructuring plan, the distributors were supposed to be reorganised
into six REDs but there has been little progress on this plan since it
was first mooted in 2003.
According to the Department of Energy's spokesman, Bheki
Khumalo, the decision to close EDI Holdings has not yet been
taken although there have been widespread reports from unnamed
government sources that the decision has been made. Apparently
this view is based on the fact that President Jacob Zuma's cabinet
has taken a decision to withdraw a bill to amend the constitution
relating to the existing rights and duties of municipalities that
distribute electricity.
At this stage, the distribution industry in South Africa is worth
about R33,5-billion and it has assets valued at about R30-billion. It
employs just over 30 000 people throughout the country. Earlier this
year, Minister of Energy, Dipuo Peters, told the National Council of
Provinces that EDI Holdings had spent R62-million on ring-fencing
the electricity distribution assets that will eventually be incorporated
into the REDs.
Peters claimed that the state of readiness for the consolidation
of 187 municipalities and electricity distributors had reached "its
highest level ever" through the signing of Accession to Cooperation
agreements with these entities. She said that 30 municipalities,
together with Eskom, constituted about 90 percent of the entire
electricity distribution industry in South Africa.
There have been sustained efforts to restructure the electricity
distribution sector but the biggest stumbling block seems to come
from local authorities, which derive a substantial amount of revenue
from electricity distribution, particularly in the larger councils. The
result is that as this year draws to a close, there is still no meaningful
progress on setting up regional distributors and there is no clarity
on the future of EDI Holdings, tasked with the programme for
restructuring.
The major problem remains that as the different municipalities,
the Department of Energy, Eskom and EDI Holdings bicker over the
future of electricity distribution the existing network becomes more
dilapidated and will require excessive investment to bring it back up
to the standard it was prior to the restructuring plans.
EDI Holdings itself has said that there are many problems
facing electricity distribution in South Africa, the most important
being that there is a constant theft of underground cables, theft of
electricity and the fact that there is no philosophy of payment from
users, many of whom insist that they should receive free electricity.
According to a statement from Jonathan Ross, the shadow deputy
minister of energy for the Democratic Alliance, the Cabinet is
believed to be considering whether to dissolve EDI Holdings. Ross
has also said that he intends to submit a range of questions to the
Department of Energy regarding the future of electricity distribution
in South Africa.
He says that EDI was mandated by the government to oversee the
spending of an estimated R25-billion backlog in maintenance but
had not done so. He says that the possible decision to dissolve EDI
has placed the future of electricity provision to all South Africans in
jeopardy and that this shows that the government's plans seem to be
directionless at this stage.
Apart from the municipalities, several independent analysts have
also questioned the practicalities of setting up an independent
distribution infrastructure, and Ken Robinson, senior executive
for resources at Accenture, says the REDs concept in its current
form is not appropriate for South Africa. He says consolidation
is necessary for the industry and recommends that many of the
smaller municipalities be amalgamated into the Eskom distribution
infrastructure or incorporated into larger municipalities.
So, while the future of the REDs seems as uncertain now as it was
when the plan was mooted, the clear fact remains that significant
investment in maintenance of the existing network is of paramount
importance when it comes to keeping South Africa's lights shining.
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