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Powerlessness, thanks to BHP Billiton



BHP disempowers us all
Patrick Bond 28 October 2012

The mining giant’s cut-rate power price and huge profits are subsidised by the poor.

The Marikana massacre has unveiled a mining-policing conspiracy against striking miners that links Lonmin shareholder Cyril Ramaphosa to Police Minister Nathi Mthetwa via incriminating emails.

But this incident pales in comparison to the decades of damage done by malevolent power relations between BHP Billiton and Pretoria officials, relations that now seem to be shifting because of Eskom’s desperation.

When the parastatal’s chief executive Brian Dames appealed to the National Energy Regulator of South Africa (Nersa) last week to review 20-year-old special pricing agreements, what he unveiled is more deadly than Marikana: his predecessors’ dogmatic support for what might be the world’s greatest-ever power rip-off.

That rip-off this year results in a R5 billion cross-subsidy for BHP Billiton from the rest of us: the firm pays just R0.09 per kilowatt hour (reputed to be the world’s cheapest), as opposed to more than R1 per kilowatt for the rest of us. This divergence began two decades ago when Mick Davis – then Eskom’s treasurer, who is now the chief executive of the Xstrata mining house – found that South African economists’ incompetent economic forecasting had resulted in electricity over-capacity of about one third. He offered large chunks of it to Gencor for the Alusaf aluminium smelters at Richard’s Bay at a cut-rate price.

Gencor became Billiton when the then National Party’s finance minister Derek Keys controversially allowed the firm to externalise assets in 1993 to buy Shell Oil’s minerals division, which was soon merged with Melbourne-based Broken Hill Properties to become the world’s largest mining and metals company.

By the mid-1990s, both Keys and Davis had become top Billiton executives and, after finishing his term as the first Nersa director, Xolani Mkhwanazi also moved to a top position in BHP Billiton, and he now serves as president of the SA Chamber of Mines.

The secret 40-year sweetheart deals made by Davis and Keys, and approved by Mkhwanazi, were finally leaked by a Democratic Alliance MP in March 2010, at the same time that the World Bank was considering lending $3.75 billion (R33 billion at current exchange rate) – its biggest-ever project credit – to Eskom to finance the Medupi coal-fired power plant.

That deal was done in April 2010, even though Eskom had hired Hitachi to build boilers worth tens of billions of rands thanks to what the Public Protector termed “improper conduct” by then Eskom non-executive chair Valli Moosa.

The boilers are being delivered way behind schedule but, more controversially, they will enrich the ANC’s Chancello