HomeSouthern AfricaREDs progress not going well

REDs progress not going well

4 August 2008 – South Africa’s regional electricity distributors (REDs) will not be ready before the 2009 national elections, minerals and energy spokesperson Bheki Khumalo admitted over the weekend.

Power dis1Khumalo acknowledged that government "has missed the [legislative] cycle" to process a RED Establishment Bill, along with changes to the Constitution which would give central government the ability to remove the electricity distribution function from the 187 municipalities and transfer this function to the REDs.

According to Khumal, implementing the REDS was “complex” and the process would need further consultation with stakeholders and interested parties, including Eskom, the national treasury and the SA Local Government Association (SALGA).

Phindile Nzimande, the chief executive of Electricity Distribution Industry (EDI) Holdings, said they had, to date, managed to get 126 municipalities to sign accession agreements. The agreements effectively ring-fenced municipal electricity distribution equipment, assets and staff ahead of transferring them to the REDs.

However, she could not comment on when the next RED would come on stream, particularly since the disestablishment of RED One in Cape Town, after both the City of Cape Town and Eskom withdrew their support. RED One operated from July 2005 until early 2007.

In addition to the constitutional implications, ESI Holdings have estimated that some 30 000 staff, currently employed by Eskom and various municipalities, will need to be moved to the REDs. Altering the course of municipal revenue streams will also prove to be challenge said ESI Holdings. This is because many municipalities derive a significant portion of their revenue from electricity sales.

Nzimande said the current electricity situation in South Africa made it all the more important to get the restructuring of the electricity distribution industry accelerated. South Africa’s distribution infrastructure currently faces a backlog of R25.7 billion (US$3.44 billion) in terms of vital refurbishment spend.