Question

What are the social concequences of Eskom's financial crisis in South Africa? Include references (10)

Answer 1

Eskom's measures its economic, social and environmental impacts Africa's largest electricity producer has undertaken an assessment of both its positive and negative economic, social and environmental impacts.

In 2011, Eskom, a state-owned South African company and Africa's largest electricity producer, undertook assessment of its economic, social and environmental impacts, both positive and negative. Coined the Eskom Factor, the project analysed qualitative and quantitative data sets of around 150 indicators in six key areas.

The assessment, based on the Measuring Impact methodology developed by the World Business Council for Sustainable Development (WBCSD), was carried out in four steps.

A four-step assessment process

First, in order to assess the full impact of its activities in South Africa, Eskom extended the sources of impacts to include supplier activities and, when possible, those of employees and key customers.

Second, Eskom identified the sources of impact with respect to its three major activities: building new facilities, operating these facilities and, ultimately, providing electricity to South Africans. Around each of these core activities, Eskom detailed the main sources of economic, social and environmental impact identifying more than 150 indicators overall.

Third, in order to determine the relevance and significance of the impacts, the company addressed two questions: "would the impacts have happened without Eskom?" and "does Eskom have influence over these impacts?" The resulting impacts constituted the basis of engagement with a range of stakeholders, including financial institutions, major suppliers and customers, nongovernmental organisations, and employees.

Fourth, Eskom identified key areas for action and evaluated different possible interventions, meant to continuously reduce the company's negative impacts.

Measuring economic, environmental and social impacts

The Eskom Factor identified six key areas of influence where Eskom's economic, social and environmental footprint could help to shape South Africa's development: From an economic perspective, the assessment showed that Eskom's impact was extensive, adding close to USD 5 billion in value to South Africa's economy in 2011. Through the provision of electricity, Eskom also supports a range of industries from coal, metals and petroleum to engineering, construction, financial and business services. Overall, approximately 7.4% of the country's gross domestic product can be traced back to the company's direct, indirect and induced impacts.

Eskom is also an important employer, job creator and capabilities developer. In addition to the 40,000 people Eskom directly employs, indirect employment amounts to some 89,000 jobs. Overall, these jobs sustain the livelihoods of some 516,000 South Africans.

Despite these positive contributions, Eskom's activities carry negative social impacts. Due to the large-scale nature of power generation projects and the need to operate a national power grid, relocation of displaced populations is sometimes necessary. There are also health and safety issues associated with such projects among the public, the company, as well as suppliers and business partners.

From an environmental standpoint, the assessment showed a considerable carbon footprint. As a result, the utility decided to add more renewable energy projects to its power mix by, inter alia, installing photovoltaic solar panels at sites around the country.

Eskom is also a significant user of water, consuming annually approximately 2% of South Africa's scarce fresh water supply. Yet, thanks to new innovative water-saving technologies, Eskom should be able to reduce its water usage by 26% by 2030.

On the social front, the company is an important catalyst for change in South Africa. At the community level, Eskom carries out corporate social investment programmes through the Eskom Foundation, with a focus on job creation, skills development and poverty alleviation. In 2011, $7.3m were invested in such initiatives.

Based on Eskom's assessment and stakeholder feedback, the company has set two key priority areas for action:

1. Supply chain assessment

2. Carbon reduction aspirations and research investments

In addition, the company has devised a plan focusing on areas where step changes are required to create a solid platform to shift performance and grow sustainably, underpinned by the vision of becoming one of the "top five" utility companies globally. The strategic imperatives are set out as follows following:

• Becoming a high performance organisation

• Ensuring financial sustainability

• Leading and partnering to keep the lights on

• Setting itself up for success (internal company transformation)

• Reducing its environmental footprint and pursuing low-carbon growth opportunities

• Implementing coal haulage and the road to rail migration plan

• Securing its future resource requirements, mandate and the required enabling environment

• Pursuing private sector participation