Most South Africans would agree that urgent intervention is needed to solve the country’s energy crisis. President Cyril Ramaphosa has received support from the ANC National Executive that a state of disaster on energy could be declared, but many South Africans are concerned that it would be another opportunity to loot and bypass laws. Professor William Gumede from the Wits School of Governance says a state of emergency on the energy crisis is not needed. Eskom’s problems could be solved with shock therapy. He told BizNews that South Africa’s dilemma is, however, very difficult for the ‘ANC party state’ to implement the effective measures at Eskom that he presented last year to managers of Eskom power stations as it will have an impact on ANC leaders. They fear it could turn away voters from the ruling party. Prof Gumede believes that the positive outcome of the energy crisis could be a new manufacturing industry around renewables. – Linda van Tilburg
A state of emergency would allow Eskom to bring in security forces permanently, quick prosecutions
I worked on the 2021 report for the government reviewing peak Metro Cities Responses to Emergencies and Disasters beyond COVID, the droughts in Cape Town, for example, and cholera down in North Kwazulu-Natal. So, what is meant when the government or the ANC says it is introducing emergency measures within our laws is that any utility can actually be declared a state of disaster. That is the context. Now when that happens, it then gives the power to the government, or rather an entity like Eskom, the board, and the management to implement the measures they want to implement without government interference, lifting certain rules, and so on. But it also allows entities to bring in, for example, the Army and Defence Force almost permanently, and also to have, let’s say, crime at the entity and investigation to be expedited, so really, really quick investigations. Even things like prosecuting people for wrongdoing will be expedited in special courts like traffic courts that you may sometimes have over the festive period.
Eskom’s problems can be solved without declaring an energy state of emergency, but it needs shock therapy
The problem can be solved without having to declare a state of emergency at Eskom. There are about five or six things that need to happen. The CEO at Eskom must be empowered to make the decisions without interference from the ANC National Executive Committee, or the ANC’s Deployment Committee or from Cabinet and so on. That’s the first thing. To change Eskom or to reform Eskom; there’s a couple of things that need to be done, which is almost shock therapy. Let’s start at a board level. A board should be appointed which is appropriate for a company that’s on a turnaround.Now such a board is different to a normal board.
So, in a normal state-owned company or private company boards, you would obviously appoint people on merit and competence and so on. But when a company is in such a state of disaster as Eskom; it needs to be turned around very quickly and restructured very quickly. Then one needs to look at, for example, a turnaround specialist, somebody on the board who has turned around a major complex engineering firm. Then perhaps one has to have somebody on the board who understands the legalities, the laws of turnaround and all of the implications thereof. Then, for example, engineers that’ve been running these types of complex businesses and financial people and a human resources person because turnaround will also mean rightsizing Eskom. The way Eskom is now, it is oversized and it needs to be almost really drastically rightsized. Many of the employees may have to go. Then also on the executive level of Eskom, it is also oversized, overloaded, people need to go at that level. Then there are contracts, a lot of Eskom’s contracts are really contracts which are overpriced contracts, uncompetitive contracts. All of those contracts needed to be reviewed and many of them may need to be canceled.
Politically it is difficult for the ‘ANC state’ to deal with the real issues at Eskom
So clearly, again, it [state of emergency] seems like this is almost like one of those knee jerk policy responses. So, instead of dealing with a really issues at Eskom, the five things that I’ve said in terms of reducing that management, bringing a competent team, merit appointments, reducing the workforce, getting rid of uncompetitive contracts, bringing in the army, bringing in the police for investigations, getting the politicians out of the way, getting companies out of the way, and letting the entity, the management actually do a good job. Right now, politically, it is very difficult for them to do it because it will impact on their senior members. The ANC fears that there will be a rebellion in the ANC if, for example, if the shock therapy, which I have explained is allowed to be implemented, and then many of its members may not vote for the ANC or they will actually rebel against President Cyril Ramaphosa.
The President’s strategy so far, which has been widely criticized as a unity strategy where he tries to keep all of the factions of the ANC together, which means there’s been a paralysis. He doesn’t take decisive action because he wants to please everyone. At Eskom you cannot please everyone. The bad people need to be dealt with. Whether they rebel, whether they leave the ANC or whether they start voting for the ANC, they need to be dealt with if Eskom needs to be turned around. There’s a second political issue that the ANC leadership is afraid of, and that is if Eskom retrenches employees, their supporters won’t vote for them in the next election. That is why often with failing state owned entities like we’ve seen in Africa since the end of the Second World War, and in other developing countries, it’s often that the governing party that caused the collapse of state-owned entities cannot do the reforms themselves. Only when a new government comes into power like the opposition that doesn’t have any of the links with the current management set up, only they can do reforms effectively and that’s our dilemma in the country right now.
Mantashe, who is ideologically opposed to alternative energy is in a very strong position
The seventh obstacle to deal with Eskom is ideology in the ANC. Many people like Energy Minister Gwede Mantashe ideologically oppose alternative renewable energy. From an ideological point of view, not from a practical point of view, not from a pragmatic policy point of view. They support coal for ideological reasons and obviously for political reasons because the coal interests support the ANC financially. Now, the problem in ANC politics is Gwede Mantashe was a key individual mobiliser for Ramaphosa’s re-election at the recent ANC national elective conference in December. So, he needs to be rewarded now. His position is National Chairperson of the ANC, but his position in the ANC is very strong because he was the person who protected Ramaphosa’s position and helped him to get re-elected. So, he will remain in the policy mix as almost the top person after Ramaphosa in energy policy. The energy policy tsar will remain and ideologically he opposes alternative energy.
ANC will keep on tinkering on the margins at SOEs, sweat facilities, burn oil
The reason why it has been so difficult to clean up South Africa SOEs has been this lack of political will in the ANC and because many of these state-owned entities have become almost part of the ANC itself. The ANC national leadership appoints CEOs, board members, even management, and approves contracts and even increasingly even more junior employees in state owned entities. For the ANC to reform state owned entities and it’s the same of Eskom, it would mean the ANC almost going against itself, firing its own members, cutting off its own members, prosecuting its own members. If it’s going to do that, then it will face a rebellion within the party and chaos within the party.
That is why there hasn’t been really serious, genuine reforms of state-owned companies. Then what the ANC tries to do, it tries to tinker on the margins. It tries to do sort of superficial reforms that will not really upset this delicate balance of interests linked to the party at these entities and it’s exactly the same at Eskom. Or it will try other methods, for example, at Eskom, what it has been trying to do is burn diesel, for example, and sweating declining assets longer, for example, and then not having to deal with the real reforms because the real reforms will cause a rebellion in the ANC itself. Now the way entities work, any entity, whether it is a public entity, a private NGO, or a whole new entity, they can only sweat things so much before they totally break down, before the system breaks down. So, with Eskom we’re in the moment of system breakdown, sweating off the assets while not maintaining it, tinkering on the margins, not doing real reforms. You get to a point where the whole system just collapses, and unfortunately, from a South African point of view, that’s where we are now.
There is an opportunity for a new manufacturing industry in South Africa around renewables
Almost the only option out now is for us, and a reform that we need from the ANC in this emergency disaster package is really to encourage alternative energy or renewable energy as quickly as possible. Allow every household, every municipality, every city, every province, every business, and every organisation to produce their own energy and to incentivise them. So, everyone produces energy, subsidising whether it is by tax or giving them their money back, like in places like Vietnam and so on. I think that is almost the only solution, and then deal slowly with Eskom.
The thing is, energy is actually an opportunity. We could potentially create a new manufacturing industry around renewable energy where we manufacture all of the components here in South Africa, we create almost entirely a new industry across the country. We allow every family, and every community to do their own things, and those who are poorer, we give them subsidies. If we can get some of the energy back into the grid and we pay people for doing that, subsidise other people for building up for manufacturing or in producing their own energy, I think we could actually create an industry. So, there are potential positive spin-offs if we use the opportunity.
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- Will Eskom crisis prompt rioting in the streets?
- Eskom’s current situation – It wasn’t always like this – Andrew Kenny
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