LONDON — In overseas media coverage of South Africa, we receive regular reminders that Eskom could be the entity that pulls the economy into a black hole. The Government has revealed its plans to resurrect the power supplier, but it is facing fierce opposition from labour unions fearing that job losses and privatisation will be the result from the plan to split Eskom in three. British publication, the Economist is weighing in with a recommendation to Ramaphosa to embrace independent producers and clean power. Ramaphosa should face down the unions who are against privatisation; if he doesn’t the future could be dark.. – Linda van Tilburg
By Thulasizwe Sithole
The Economist went to the control room of Scatec Solar in Cape Town remarking that the company which runs 16 solar plants in 11 countries experiences few problems and when they occur, the errors are minor. In South Africa, the company has three solar power stations that service 93,000 homes. Compare this to South Africa’s state-owned utility Eskom, where rolling blackouts occurred in March as the national power supplier failed to meet demand. During this period Eskom regularly took “4,000 megawatts off the grid – about one-eleventh of its total capacity” of just over 45,000MW. A third of Eskom power stations “are broken or shut for maintenance.”
Goldman Sachs Sub-Saharan African head, Colin Coleman has warned that Eskom “is the greatest systemic risk to the South African economy.” He has warned that the power blackouts can reduce the country’s GDP growth by 0.9%. The Economist warns that the bail-outs to Eskom by the Government would continue and that the electorate who will be going to the polls on 8 May to elect new members of Parliament would not take kindly to “voting in darkness.”
The predicament that Eskom find itself in has several roots:
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- The legacy of apartheid of “big and dirty power stations” with the ANC tasked to provide power to “two-thirds of black households” who did not have electricity up to 1994.
- Eskom became the symbol of the failings of the ANC Government; new plants were delayed by Mbeki because of initial overcapacity, which was used up by 2008 leading to load-shedding. The construction of new coal power stations which was meant to address shortages ran late and cost three times more than the original budget according to analyst Chris Yelland.
- Eskom bosses “spent more time stealing than managing” and the Zuptoids and the Guptas managed to steal tens of billions of rands with “irregular and inflated” contracts. Eskom’s wage bill is three times larger and coal costs the utility five times it did in 2007.
- The vertical integrated structure of Eskom separating it into generation, transmission and distribution, which have been abandoned by most wealthy countries “blocks competition, reduces transparency and deflects accountability.“
South African presidents have on seven different occasions promised to break up Eskom, but the Economist is pointing out that what makes the recent announcement by Ramaphosa different is that there is an alternative to the dominance of a coal-based model and that is “a market-based model that is open to renewable energy.”
The country has started to experiment with this model. A clean power energy model has existed since 2011 and was “widely acclaimed to drive down the cost of power.” It was set up by South Africa’s Treasury and the auction resulted in $14bn of privately invested capital and it generated 5,000 megawatt of extra capacity. When Zuma tried to force through his nuclear power stations that he agreed to with the Russians, the Government “refused to sign the agreements with independent power projects that had won the auctions.” In 2018 the stalled electricity projects finally got the approval and the Scatec Solar could go ahead and build three plants in Upington.
The Economist makes a strong case for renewable energy for South Africa, saying it makes financial sense, helps the environment, generates power more cheaply and can be built quickly without “straining Eskom’s balance-sheet.” International auctions priced green energy at 30c per kWh versus 50c per kWh for power from Eskom coal power plants. A former Eskom engineer at ENERTRAG SA, a renewables firm argues that “South Africa should never build another coal station ever again, purely on the basis of economics. “
The Integrated Resource Plan, which is expected after the 8 May elections should reveal the roadmap to South Africa’s energy future. “It ought to lay out how South Africa will make two transitions: from coal to renewables; and from monopoly to a market-based system. It is expected that mining trade unions and “vested interests” will offer resistance to both. The Economist says Ramaphosa should “face them down.” If he fails, the future will be dark for him and for South Africa.
