Alec Erwin, the public enterprises minister, on Tuesday issued a warning that the health of Eskom's balance sheet remained critical as it went into both local and international markets for borrowing, which is why, he said, electricity tariffs must start to reflect the real costs of its production.

He told a breakfast meeting held by Safmarine that the government remained committed to the improvement of Eskom's credit ratings. "The recent downgrading by Moody's is a concern," he said, "and we must avert any potential future downgrades by other ratings agencies."

He said that the most recent costing of Eskom's building programme estimated it would be R1.3-trillion.

"A build of this magnitude will undoubtedly create a number of challenges, not only with regard to skills and balance of payments pressures," he said, "but time is of the essence, and we need to deliver the build timeously.

He added that the challenge offers an unmissable opportunity for South Africa to create an industrial base to supply the expansion programme, by developing the relevant design and manufacturing capabilities to globally competitive standards, in order to supply not only the local market, but eventually, the global economy as well.

"South Africa is a major raw material supplier in the form of coal and uranium, we also have manufacturing capacity, as well as significant nuclear technology capacity," the minister said. "With the expansion of global energy systems, supply conditions are likely to remain in favour of suppliers for some time. For reasons of cost and security of supply, therefore, we must consider enhancing our manufacturing capacity to ensure shorter supply chains.

SA Power Project

He said this is the focus of the South African Power Project, headed by former Eskom Chief Executive Thulani Gcabashe. "We must be cognisant of the fact that many other countries are aware of the opportunities currently presenting themselves in the energy sector globally, and will not hesitate to get involved," he said. "If we hesitate, we may miss out on a crucial moment to advance this economy from a net buyer of equipment to a more competitive global supplier."

The minister admitted that the build programme could have started earlier than it did, but he insisted that it was on track. "We are working around the clock to ensure the programme is delivered on time," he said.

He said that the country survived the winter without power cuts, but he warned that the situation remained serious. "As we approach the summer months, traditionally the time during which Eskom enters maintenance season, the system will remain vulnerable, as a lot of plant will be out of service," he said.

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