SA’s energy crisis could worsen, new electricity minister warns

By S’thembile Cele and Paul Burkhardt for Bloomberg News

South Africa’s newly appointed electricity minister warned that record electricity outages could get even worse and said the state power utility’s performance targets need to be reviewed to determine whether they are appropriate.

“All indications are that it is going to be difficult” as electricity demand increases going into winter and the dire energy situation could deteriorate further, Kgosientsho Ramokgopa said in an interview at Bloomberg’s Johannesburg office on Friday. 

“We need to set explicit targets” and those must be met to provide confidence to business, the markets and households that the crisis is being addressed, he said.

Africa’s most-industrialized nation has been subjected to rolling blackouts every day this year as Eskom Holdings SOC Ltd., the state company that supplies about 90% of the nation’s electricity, fails to meet demand from its dilapidated plants. 

Read more: What would happen if South Africa’s electricity grid collapsed

President Cyril Ramaphosa this month named Ramokgopa as electricity minister, a new position in the presidency, and tasked him with reducing outages, improving Eskom’s plant performance and accelerating the procurement of additional generation capacity.

“I see myself as a portfolio manager addressing the multiplicity of programs” that have been instituted to improve the power supply, Ramokgopa said. “There’s no minister who has done that.”

Ramokgopa will visit power stations and meet with business representatives to determine firsthand how much unutilized generation capacity can be connected to the grid and how quickly — an assessment that should take about four weeks. Thereafter, he intends releasing a detailed plan spelling out how much additional power will be brought online and over what timespan.

Eskom’s performance has deteriorated to the point where less than half of its capacity has been regularly available. Mpho Makwana, the utility’s chairman, on Thursday commended its staff after six of its plants registered an energy availability factor of 70% for the first time since May.

“The problem with that is just today we could be told the same ones are now down to 40%,” Ramokgopa said. “The fact that a monopoly issues a statement to celebrate” such a performance is “just an illustration of the crisis,” he said.

The central bank estimates that outages, which have been instituted since 2008, will shave 2 percentage points off growth this year. The blackouts have dented support for the governing African National Congress, with opinion polls showing the party is in danger of losing its parliamentary majority in next year’s elections.

South Africa’s National Treasury has hired a consortium of international consultants to review Eskom’s fleet of 14 coal plants and determine which ones can be restored to meet the original equipment-manufacturers’ standards. The utility will have to implement the group’s recommendations to access 254 billion rand ($13.8 billion) of debt relief from the government over the next three years.

Read more: From the FT: Ramaphosa’s new electricity minister gets muted applause

In the search for solutions, “all options are on the table,” including issuing concessions to private investors to run power plants if that is found to be feasible, according to Ramokgopa. The privately owned Kelvin power station boasts of having an 80% energy availability factor, although that is unconfirmed, he said.

Efforts to mitigate demand for energy should also be explored, including the option of utilizing technology to remotely switch off water heaters in households, which could potentially free up as much as 4,000 megawatts of capacity, Ramokgopa said.