Director of Xaris Group, Hennie Steyn joined Alec Hogg in the CNBC Africa studios to find out what’s wrong with Eskom strategy.
The important thing is that the major problem is the policy that governs power in South Africa. There’s very little movement and room for private entities to participate.
Is it true that Government seems to be moving away from public/private partnership?
I didn’t see the article this morning but it’s very difficult as an IPP (Independent Power Producer) to step up to the challenge and start producing power in South Africa. South Africa needs to do a bit more to open up the doors. That’s why we’re looking at other countries in Africa as well, such as Namibia, Tanzania, and Kenya. They’ve all been focusing significantly in terms of opening up their transmission networks so that private money can participate in that.
Group 5 is building a $400m power plant in Ghana. They have the expertise to do that, you would wonder why they wouldn’t be doing it here?
Well, the opportunities are currently outside of South Africa and most of the EPC companies like Group 5 focus on that and make sure they can reap them in. It’s the same with Namibia.
Why aren’t they doing it here? What’s stopping them?
I think there’s currently a bit of a shortfall. I know the Department of Energy is working pretty hard to change that, but you need to open up the market. There is no way to move into the market, start producing power, and put it into your grid system. It’s a long process. South Africa has an extensive process, and many rules and regulations, partly because they’ve had a strategy for a long-term where they actually build major plants when they should have gone smaller, and have more competitors playing in this field.
Why? I don’t mean ‘why they should bring competitors in’ but why have they gone the route they have?
I think it was part of their socio-engineering part. It was good at the time. Remember, what hits us now is ten years old. The decisions that you make in the power industry takes ten years to see the real effect. Government needs to step back and say ‘let’s bring the private sector into this and change it’.
Is that not happening? I was under the impression that because of the crisis South Africa’s in, new ideas/new thinking is being imposed.
There are many new ideas. In the renewable space, many plants are coming online but it’s not a solution. That’s just filling a small gap. If you take your larger plants that they’re constructing now, they’re still going to need standby plants. The older plants are becoming more and more outdated, so they need to open up their mindset in terms of bringing smaller plants into the fray, by allowing those companies to start operating and putting power into the grid.
Who’s done that successfully in the world?
Firstly, Americans have been the leaders in that. All over, Europe is working like that. If you compare a country like Turkey to South Africa, which is fairly similar, you’ll find it’s exactly how it worked. They’ve been through a process where the grid system is completely independent, so whoever generates power puts it in there, and they sell their power at competitive rates up to the point where they started bringing big plants into the system. Those plants are taking up the smaller guys, but the smaller guys have paid off their plants.
You say we aren’t allowed to do that here.
I think it will get there, but I think it’s too slow. The Department has really, applied their mind to this but we need to see a bit more aggressive action.
Let’s look at other examples around the world, apply it here, and we might have to go and buy a whole lot of nuclear power plants from Mr Putin.
Well, nuclear plants are probably 15 to 20 years away from reality, so wherever bargains on that makes a big mistake. I would rather focus on making sure that our assembly of the number of plants you put into the South African environment is sufficient to cover (a) shortages, (b) failures, and (c) growth. You can’t build that many big plants in a period of ten years. You need to focus on bringing smaller plants into the equation.
