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    Eskom procurement concessions unlikely to reduce load shedding


    May 16, 2022 - Banele Ginindza

     

      ESKOM’S new ability to short-circuit Public Finance Management Act (PFMA) procurement processes is likely to help the utility to move faster, but there remains concerns that continuing corruption and the need for extensive maintenance may take more power off the grid for longer.

      Eskom said on Friday that the National Treasury’s relaxation of some procurement and supply chain management rules and processes contained in the PFMA would assist it in speeding up critical and urgent procurement.

      The amendment, which is outlined in an instruction note that became effective in April, would also empower it to engage directly with original equipment manufacturers (OEMs) and maintenance suppliers.

      Eskom, which said it needed at least 77 days just to get financial approval from the National Treasury for procurement, also revealed plans to in-source more maintenance to OEMs, which will enable its technicians to focus on core functions like generation and transmission.

      Energy specialist Chris Yelland commented: “It is a two-edged sword and we really have to be careful about this. On the one hand we have seen the abuse of funds in the past, which leads to the reality that the rules are there for a reason.

      “But on the other, the focus on maintenance might actually be worse for power supply as systems have to be taken down for longer to do planned or unplanned maintenance which may leave us even worse off.”

      According to the “relaxation notes”, Eskom would have to report to Parliament's Standing Committee on Public Accounts (Scopa) after a transaction to ensure there was accountability in the spend.

      The utility announced over the weekend that stage 3 load shedding would be implemented from today (Monday), up from stage 2 over the past month or so, as the system became more constrained with the increasing demand of the winter season.

      Numerous breakdowns from its various generating units have increased the Open Cycle Gas Turbine (OCGT) diesel bill, which is hovering around the R1 billion mark for the two months since the beginning of the current financial year, as it battles to maintain reserves and keep the lights on.

      Chief procurement officer Jainthree Sankar says the amendment will “give Eskom back control over the most critical and urgent of its procurement”.

      Sankar said in Eskom's announcement: “In the plan to drive efficient procurement and engage with OEMs and maintenance suppliers, this measure supports the efforts for Eskom power stations and operating units to work faster and more efficiently on procurement of what they need at an operating level.”

      Yelland said Eskom's priorities would be maintenance and spend on development of the transmission grid, both of which had been sidelined in favour of keeping the lights on.

      "It will help maintenance and speed things up a bit, but I do not think maintenance on its own is the ultimate solution. The more maintenance is done, the more load shedding as generation systems are shut down. There are no safety measures. Investment in the grid is also a priority. A lot of the IPP procurement has been delayed because of access to the transmission grid," Yelland said.

      Sankar said the amendment reflected growing trust in the utility by the National Treasury and the Department of Public Enterprises.

      Eskom insists it will continue to maintain the principles of Section 217 of the Constitution in that competitive bidding be the usual mechanism for procurement, with deviations remaining the exception rather than the norm.

      “The overall intent of the relaxation is to ensure the swift and flexible implementation of the procurement processes in a way that takes into account the core principles of the PFMA while ensuring fairness in procurement processes.”

      The existing oversight of Eskom’s handling of the public purse through the Scopa engagement and reporting to other committees of Parliament would be reinforced by the requirement to report on procurement activities under this exemption 14 days after the conclusion of transactions in order to maintain continued oversight by the Treasury and the Auditor-General.

      To effectively implement this note, the Eskom procurement team as led by Sankar, has engaged and clarified matters with National Treasury, sensitised the procurement staff and made the amendments to current Eskom procurement procedures.

      Eskom survived a grilling in Parliament recently when the Scopa drilled down on the operational issues that had normalised load shedding.

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