By Amogelang Mbatha and S’thembile Cele
South African President Cyril Ramaphosa declared a state of disaster to enable the government to accelerate its response to an ongoing energy crisis, and said he’ll appoint a minister in his office who will focus on boosting the power supply.
“Our country has for many months endured a debilitating electricity shortage that has caused immense damage to our economy and the lives of our people,” Ramaphosa said in his state-of-the-nation address in Cape Town on Thursday. “Extraordinary circumstances do call for extraordinary measures.”
Electricity shortages that have dogged the country since 2008 have reached unprecedented levels, with the country subjected to rolling blackouts every day so far this year. Ramaphosa has been pledging to turn monopoly state power utility Eskom Holdings SOC Ltd. around and bring new generation capacity online ever since he took office in February 2018, but many projects have been delayed by red tape and government indecision.
The outages, known locally as loadshedding, threaten to erode support for the governing African National Congress to such an extent that it risks losing its grip on power in next year’s elections. While Gwede Mantashe, the energy minister, has said the problems can be fixed within six to 12 months, Eskom Chairman Mpho Makwana has warned blackouts will persist until at least 2025 because the utility needs to continue taking its old coal-fired plants off line for maintenance.
The central bank last month cut its economic growth forecast for 2023 to 0.3% from 1.1%, and sees the blackouts shaving two percentage points off output growth.Â
Ramaphosa’s appointment of a minister in the presidency to focus solely on improving the electricity supply could potentially sideline Mantashe, who has resisted the president’s efforts to reduce the nation’s reliance on coal and utilize more green energy. The Ministry of Public Enterprises will continue to oversee Eskom.
The state of disaster will enable the government to provide practical measures needed to support businesses in the food production, storage and the retail supply chain, including for the roll-out of generators and solar panels, Ramaphosa said.
“Where technically possible, it will enable us to exempt critical infrastructure such as hospitals and water-treatment plants from loadshedding, and it will enable us to accelerate energy projects and limit regulatory requirements while maintaining rigorous environmental protections, procurement principles and technical standards,” he said.
Tax Breaks
The main opposition Democratic Alliance said it will challenge the declaration of a state of disaster in court. The previous use of the legislation to respond to the Covid-19 pandemic resulted in the ANC having “unfettered power to loot without any parliamentary oversight,” DA leader John Steenhuisen said in a statement.
The government also plans to give tax breaks to businesses and households that generate their own solar power, Ramaphosa said. Details of the incentives will be announced by Finance Minister Enoch Godongwana in his Feb. 22 budget.
Eskom will be given additional funding to enable it to buy diesel to power its generators until the end of March next year and invest in new transmission lines in the Eastern Cape, Northern Cape and Western Cape provinces.
A 70-year-old former labor-union leader and one of the richest Black South Africans, Ramaphosa comfortably won a second term as ANC leader in December, meaning he’ll be the party’s presidential candidate in next year’s elections. His victory should give him scope to appoint allies to key posts and ensure his administration acts more decisively.
The president said the government will be restructured in due course and departments will be rationalized to save money, but didn’t give details. Business Unity South Africa, the country’s biggest business group, wrote to Ramaphosa last week to urge him to use the opportunity to appoint a more competent executive, and to do more to institute economic reforms and crack down on corruption.
“Many investors simply don’t believe our plans,” Busa said in the letter. “To shift this view, they will need to see consistent” delivery, the organization said.
The start of Ramaphosa’s speech was delayed for about 45 minutes by interjections from the Economic Freedom Fighters, the second-largest opposition party, which says he has a case to answer in connection with a scandal related to the theft of cash from his game farm. They were eventually ejected from the Cape Town City Hall after trying to storm the stage and scuffling with security officers. The proceedings were held in the hall because parliament was gutted by a fire last year.
Other highlights:
- A new project to bring water from neighboring Lesotho to South Africa will commence this year; more dams will be built and the holding capacity of others will be increased.
- The government aims to mobilize more than 2 trillion rand in new investment by 2028.
- Infrastructure South Africa has been allocated 600 million rand ($33 million) to prepare for the implementation of new projects, especially in rural areas.
- A centralized entity will be established to manage state companies.
- The National Treasury is working on measures to mitigate against rising food prices.
- Welfare grants will be increased to cushion the poor against rising inflation.
Read more:
- ANC in crisis: polls show steep loss of support ahead of elections – Katzenellenbogen
- Will Eskom crisis prompt rioting in the streets?
- SA government sued by opposition over power crisis
With assistance from Paul Vecchiatto, Monique Vanek and Renee Bonorchis.
© 2023 Bloomberg L.P.
