TRC Final Report

Volume 6

Section 2

Chapter 5

Subsection 4

THE CASE OF THE PARASTATAL S

29. The parastatal sector sheds further light on the role and responsibility of business in the apartheid era, particularly in view of the way the apartheid government used the parastatals to further its own objectives. Eskom is used here as an example without prejudice. In using this example, we need to acknowledge the many changes Eskom has made in the last decade in relation to the racial identity of its employees and the pioneering role it has played among South African industrial giants in investing in building infrastructure in poor black neighbourhoods. This does not, of course, dilute the critique of its apartheid-era practices and its deep collusion with the political and economic structures of apartheid.

30. Between 1950 and 1980, international financial institutions and foreign private banks granted loans to Eskom amounting to at least US$7.5 billion. British banks contributed 26 per cent, banks in France almost 24 per cent, West Germany about 17 per cent and Switzerland more than 12 per cent. Substantial amounts were also granted by the World Bank, public export credit agencies and parastatal banks. Loans to public sector corporations and business enterprises w e re the economic lifelines of the apartheid economy. This point is reinforced by correspondence between Swiss banks and the Finance Ministry in Pretoria : foreign banks would grant loans to Eskom only on condition that central government signed a declaration of guarantee or a warrant to the creditor banks.

31. During the sanctions years (1986 to 1989), foreign debt represented between 44 and 56 per cent of Eskom’s total net debts. During the 1980s, Eskom’s capital investments at current prices amounted to R35 billion. A fairly large part of these investments involved the importation of capital goods and services. The South African Reserve Bank provided long-term forward cover, especially in the US$/Rand market. From April 1981 to the end of January 1998, a total loss of R26.4 billion was recorded on the Forward Exchange Contracts Adjustment Account. Of this amount, R19.1 billion was directly attributable to long-term forward cover granted directly to the erstwhile parastatals, primarily Eskom, in the late 1970s and early 1980s. Such losses had to be paid for by the taxpayer.

32. As a parastatal within the apartheid system, Eskom produced extremely cheap energy, making the exploitation of the rich mineral endowment the foremost ‘comparative advantage’ in South Africa’s relations with global markets.

33. At least until the mid-1980s, the minerals–energy complex produced more value added per worker employed than any other economic sector. It was here that most capital accumulation took place, where most of South Africa’s exports and a sizeable part of its gross domestic product were produced. Historically, the production of electrical energy served mainly the needs of the mining industry.

34. Like mine workers, black electricity workers were mainly migrants, housed in the same controlled single-sex compounds and receiving the same low wages (which disregarded the needs of the workers’ families back in the labour reserves). For the 58 years between 1911 and 1969 there was no increase in the real wages of black miners and electricity workers.

35. Eskom also had to promote the political objectives of the ruling National Party. Since the Broederbond<sup>74 sup>influenced the selection of Eskom’s chief executive officers, there was seldom a conflict of interests. Thus, Eskom:

a offered preferential employment to poor whites as guard labour;

b did not recognise independent, non-racial trade unions until 1987;

c replaced the racial job colour bar with security concerns in the 1980s, requiring black employees to get clearance from the security police;

d offered long-term supplier contracts to Afrikaner coal mining companies;

e used Afrikaner financial institutions to issue and market Eskom public bonds in the domestic market, to procure foreign exchange on its behalf and administer its bank accounts;

f supported the implementation of apartheid’s Bantustan policy by offering extra cheap tariffs for industries settling in ‘border areas’, like Alusaf in Richards Bay;

g buttressed the state’s claim to regional hegemony by controlling the development of electricity generation and distribution in occupied Namibia;

h propped up the colonial empire of Portugal in Angola and Mozambique by supporting the building of the Cahora Bassa and the Gove and Calueque dams, as well as the hydro-electric power stations at Ruacana in the Cunene river basin and at Cahora Bassa on the Zambezi, and

i followed the state’s guidelines in response to the threat of economic sanctions by establishing a mammoth oversupply capacity of electricity generation.

36. Because of its strategic importance, Eskom, its power stations, substations and control centres were declared national key points in 1980. All senior security o fficers and senior personnel at key points had to obtain security clearance. Eskom established its own counter-intelligence unit, which worked closely with the security police and military intelligence. Eskom also created its own militia force, procured a substantial number of firearms and established its own armoury.

37. Evidence was presented under oath to the Commission that, during the twilight years of the apartheid system, high-ranking members of Eskom attempted to make available or sell a portion of this armoury to Inkatha. According to the evidence, this was authorised and done with the knowledge of the Commissioner of Police.

38. Eskom co-financed the South African Uranium Enrichment Corporation and financially supported research into the development and manufacture of apartheid’s nuclear bombs.

39. During its rapid expansion period between 1950 and 1980, Eskom had no particular interest in supplying the households of black people with electrical energy. The Group Areas Act of 1950 separated the administration of black urban areas from that of white cities. This often meant that black areas were without electricity services altogether. White municipal areas normally had industrial as well as residential demand. This could be used to balance the load factor, resulting in lower overall costs for industrial as well as residential users. As black townships were electrified, there were no industrial users to balance the peak load, with the result that consumers in black townships paid a very high demand charge whilst using considerably less electricity. Thus, in effect , electrified black townships subsidised neighbouring white municipal areas.

40. It was estimated in 1992 that about three million black households had no access to electricity – this after a history of electricity generation in South Africa of more than 85 years; equally some 19 000 schools and 4000 clinics serving black communities had not been linked to the national electrical grid.

41. The politics of racial segregation and apartheid suppressed for decades both the human rights and the consumer demands of South Africa’s black people. People living in low-income black residential areas, both urban and rural, persistently faced high environmental costs. Energy sources other than electricity (low-quality coal and wood burning in open indoor fires without proper stoves and chimneys, paraffin and candles) have constantly polluted the air and endangered their users. Accidental fires and burns, paraffin poisoning and chronic bronchitis were all too common. On winter evenings, dense smog with high concentrations of sulphur dioxide, carbon dioxide, airborne ash particles and dust was found hanging low over black residential areas, leading to respiratory diseases and even circulatory disorders, and severely reducing the quality of life for young and old.

ESKOM AND OTHER PA R A S TATALS: THE CASE FOR REPARATIONS

42. In summary, the case for reparations in relation to parastatals such as Eskom is based on the following two factors:

• a The role of foreign lenders in supporting key institutions of apartheid. Debts incurred by Eskom and other parastatals during apartheid should also be considered ‘odious’ insofar as the new political dispensation is concerned .
• b The failure of the parastatals to invest in infrastructure and services for the majority of the population, despite being financed by public means. Hence t h e re is a case for highly subsidised investments in electricity and other services for the poor black majority today.