Business against load-shedding: Blueprint of De Ruyter/Oberholzer/Vodacom gets first Rbns

Without the significant contribution of Business Against Crime, South Africa’s already difficult position would surely be a lot worse. That body pioneered the template for tackling the country’s most difficult challenges through public-private partnerships. Last week saw the finalisation of a similar collaboration on electricity supply with the innovative blueprint of a concept called Virtual Wheeling. It provides a platform for SA businesses to meaningfully contribute in ending load-shedding. Stemming from a project between Vodacom and Eskom during the De Ruyter/Oberholzer era, Virtual Wheeling has attracted its first billions via a commitment by SA’s biggest mobile phone company with other big companies poised to follow. In an interview today, Vodacom CEO Shameel Joosub unpacked the details for BizNews editor Alec Hogg.

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Relevant timestamps from the interview

  • 00:00 – Introductions
  • 01:13 – Shameel Joosub on Vodacoms’ vitual wheeling agreement with Eskom
  • 04:19 – Joosub on what the agreement means for Vodacom
  • 05:56 – On other corporates following suit
  • 07:20 – On how Vodacom stands to benefit from the agreement
  • 08:39 – On having faith in Eskom to hold up their end of the agreement
  • 09:16 – On how the agreement came to fruition
  • 10:37 – On how agreements like this will benefit SA’s electricity grid
  • 11:31 – On the costs involved
  • 11:59 – On potential suppliers
  • 12:33 – On pricing
  • 13:43 – On the private sector stepping up to combat load-shedding
  • 15:01 -On how other companies can benefit from wheeling agreements
  • 15:42 – On moving to renewables
  • 16:38 – On how load-shedding has impacted Vodacom’s business
  • 18:29 – On Vodacom’s relationships with Eskom and with municipalities
  • 20:16 – Concludes

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Edited transcript of the interview with Vodacom Group CEO Shameel Joosub:

Alec Hogg: During the recent business conference, Jan Oberholzer, who was the Chief Operating Officer at Eskom until very recently, referred us to his hope that the Virtual Wheeling programme would have a major impact on South Africa’s load-shedding challenges. I’m here with the man at the helm of Vodacom, which has implemented the first virtual wheeling agreement. Shameel Joosub, is Vodacom’s Group Chief Executive. Shameel, please explain what ‘Wheeling’ is – before we delve into the specifics of ‘Virtual Wheeling’….

Shameel Joosub: Certainly, Alec, and thank you for having me on the show. Wheeling essentially involves generating power at one location and transporting it to the site where it’s needed. For instance, if you have a solar plant and you’re transporting the power to your factory, that’s called wheeling. Virtual wheeling is a bit different. In Vodacom’s context, we have 15,000 sites. Power might be produced in the Northern Cape by an independent power producer, and then it needs to be distributed to all 15,000 sites around the country. Virtual wheeling allows us to contribute that power to the national grid, and then Eskom virtually wheels it based on our consumption, effectively offsetting it. This way, we still consume the power and receive a credit for the contribution. It also relieves both the treasury and Eskom of having to sign up with the independent power producer, which could be in wind or solar energy.

Alec Hogg: You contribute power to the grid, and you have to do so in a manner that aligns with your consumption rates. There are various rates and complexities, but essentially, Eskom will issue a credit for your contributions. Is that accurate?

Shameel Joosub: Yes, that’s correct. We’ve developed a platform to manage the offtake locations, and in the end, Eskom provides us with a credit.

Alec Hogg: Given the power issues in South Africa, especially during load shedding, how much has Vodacom invested to keep its network running?

Shameel Joosub: Over the past four years, we’ve spent about four billion rand on additional batteries for the network. Annually, we’re also spending around R800 million on diesel. About 26% of our power consumption now comes from diesel, an 80% increase from last year. It’s a significant challenge for us.

Read more: BN@10: Jan Oberholzer delivers a masterclass on how to get Eskom – and the SA economy – back on track

Alec Hogg: What strategies are in place to deal with this?

Shameel Joosub: Firstly, we’re trying to generate power locally where possible, but there are challenges, such as solar panel theft. Secondly, we’re attempting to address the underlying issue of power scarcity by participating in the virtual wheeling programme. By doing so, not only does Vodacom benefit, but other corporations can follow suit. If multiple companies contribute to the grid in this way, it would alleviate some of Eskom’s challenges.

Alec Hogg: Have you estimated the potential contribution of corporate South Africa to this Virtual wheeling programme in the near future?

Shameel Joosub: Initially, we’re focusing on offsetting the power we consume from Eskom. Our goal is to expand beyond that, depending on how quickly other corporations adopt this strategy. A programme like this could potentially add over a thousand megawatts to the grid. It would be particularly beneficial for corporations with multiple sites, like retail chains and other telecommunications operators.

Alec Hogg: If the programme doesn’t address load shedding directly, how does it support Vodacom’s business case?

Shameel Joosub: The programme enables us to play a role in resolving the larger issue of power scarcity. Meanwhile, to address immediate challenges, we’ve invested heavily in batteries and diesel to maintain network availability. Our proactive approach in this regard has given us a competitive edge, despite the high costs involved. Customers may not always realise it, but networks do rely on power to function.

Alec Hogg: Eskom has maintained its contractual obligations with South 32’s Hillside smelter, despite the cost implications. Does this boost your confidence in Eskom’s commitment to fulfilling its obligations on the virtual wheeling system?

Shameel Joosub: Certainly, it’s reassuring. Our participation eases some of Eskom’s liabilities by allowing them to use our balance sheet instead of their own. I believe Eskom is fully supportive because they understand the need for assistance, and they’re optimistic about the broader involvement of corporate South Africa.

Alec Hogg: How did this virtual wheeling initiative begin? Who initiated the conversation?

Shameel Joosub: The concept emerged from a meeting we had with Eskom to understand the depth of the power issues. At that time, the key people were Andre de Ruyter and Jan Oberholzer. It took a year of joint development to iron out the details and build a virtual wheeling platform for reconciliations.

Alec Hogg: So, the addition of power to the grid through this deal with independent power producers (IPPs) won’t immediately stop load shedding, will it?

Shameel Joosub: Correct, it won’t stop load shedding right away. It aims to alleviate some of the pressure on Eskom by contributing additional power to the grid. This is a part of a broader effort by corporate South Africa to support the energy sector.

Alec Hogg: What kind of financial commitment is Vodacom making as the first company to adopt this approach?

Shameel Joosub: We are in the final stages of determining the exact numbers, but we’re looking at a commitment of a few billion rand. We plan to sign a 15- to 20-year off-take agreement with Eskom, making it a long-term investment.

Alec Hogg: Are there enough potential IPPs to supply the necessary power?

Shameel Joosub: Absolutely, there’s no shortage of IPPs. We’ve already conducted procurement processes and have a shortlist of preferred suppliers. After finalising the agreement with Eskom, the next step is to complete the contracts with these IPPs. We’re particularly interested in those who either already have power available or are close to having it, as this would enable us to move swiftly.

Read more: BN@10: Eskomite no more, Jan Oberholzer shines a light on the future of load-shedding

Alec Hogg: Can you speak about the pricing?

Shameel Joosub: Certainly, the pricing is in the final stages of being determined, largely due to fluctuations in the exchange rate since our initial analysis last year. While we expect some benefits in terms of the rate we’ll receive, it’s not our primary motivation. Our main goal is to address larger issues, such as making our power supply greener.

Alec Hogg: It was interesting that Discovery will soon introduce a new energy offering for businesses. A couple of years ago, the private sector was not allowed to build any power plant larger than one megawatt. You’ve mentioned the possibility of generating a thousand megawatts, enough to offset one stage of load shedding. Is this based on discussions you’ve had with other interested companies?

Shameel Joosub: Yes, the telecommunications sector is keen to follow our example. Once we’ve established a functional process, other companies can easily implement it as well. Eskom will also play a role in spreading the word. The scale could exceed a thousand megawatts, depending on how quickly other companies come on board. Finalising the Independent Power Producer (IPP) part of the project is crucial for gaining momentum.

Alec Hogg: So you’ve essentially laid the groundwork for other companies to follow. But what benefits will they reap, especially if this doesn’t directly alleviate their own load shedding?

Shameel Joosub: The larger benefit lies in reducing the overall levels of load shedding. Companies will also experience a financial advantage through the difference between the Wholesale Electricity Price (WEP) and the rate they pay to the IPP. This can help offset other costs, such as those associated with diesel fuel.

Alec Hogg: Is the move towards renewable energy a part of Vodafone group’s mission statement?

Shameel Joosub: Absolutely. The broader Vodafone group aims to achieve net-zero emissions by 2030. Achieving this goal in the South African context is challenging, but we’re developing targeted plans in each of our markets. These plans involve engaging with Independent Power Producers (IPPs), sourcing green power, and reducing diesel consumption.

Alec Hogg: How much of a challenge is electricity management for you, given the scale of your operations?

Shameel Joosub: It’s a significant concern, especially when dealing with load shedding. Managing power across 15,000 points of presence, from batteries to generators, is a logistical challenge. The situation complicates further with fuel price increases, affecting both operational costs and network availability. However, we have noticed an increase in data usage when load shedding occurs.

Alec Hogg: How does your direct relationship with Eskom compare with your dealings with municipalities, especially concerning load shedding?

Shameel Joosub: About 20% of our power supply comes directly from Eskom. As they gain confidence in our operations, we hope this percentage will increase. Ideally, we want 100% of our power to come from renewable sources. In fact, we’ve already begun generating about 9.6 megawatts of solar power on our campus.

Alec Hogg: So, is the plan to allow corporate South Africa, or even individuals with renewable sources, to contribute back to the grid?

Shameel Joosub: Yes, we’re looking at how corporations and individuals can contribute renewable energy back to the grid. Once cities like Johannesburg allow this, many large companies could become significant contributors.

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