DUBLIN — I’m glad I don’t have Cyril Ramaphosa’s job. The spiralling load-shedding crisis at Eskom – which he referred to on Thursday as a “hugely damaging reality check” – is fast becoming South Africa’s defining political issue, involving, as it does, corruption, mismanagement, poor governance, and labour issues. Indeed. Ramaphosa spent a chunk of his parliamentary time on Thursday reassuring angry labour unions that his plan to split Eskom into three pieces was not privatisation by the back door. As an aside – it’s telling that unions cited fear of job losses in their opposition to privatisation – it suggests that they know that staffing levels at Eskom are either too high or staff too highly paid for sustainability. But, of course, Eskom’s problems go well beyond labour costs, a fact that Ramaphosa underscored in his answers to parliament. And it’s going to take a lot of time and investment to fix them. From a consumer perspective, there is a hopeful glimmer here: if Eskom is actually split into generation, transmission, and distribution, then it should theoretically become easier for private power generators to start producing electricity and selling it into the transmission chunk of Eskom, competing with the generation piece. For the most part, Eskom does OK at channeling power around, when it actually has power to spare. Much of the crisis stems from generation, where a lack of maintenance and investment has left the country thousands of megawatts short. By opening up the generation market to more competition and encouraging the transmission network to buy power at the best available price from whoever wants to sell it, there may be some hopes for a future in which the lights stay on. But having a functional electricity system won’t solve the problem of Eskom’s massive debt and the shockingly badly managed Medupi and Kusile projects. Ramaphosa’s job looks tougher every day. – Felicity Duncan
Power Struggle: Electricity Outages Hit South Africa Months Before Election
By Gabriele Steinhauser and Simthandile Ntobela
JOHANNESBURG — The biggest test to the South African president’s power right now: Can he keep the power on?
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Africa’s most-developed economy this week is experiencing its worst blackouts in years, with households, businesses and key infrastructure left without electricity for up to nine hours a day. The power cuts have hobbled the country’s mining sector, paralysed traffic behind disabled stop lights and forced people to cook dinner outside on paraffin stoves – less than three months ahead of national elections that will determine whether President Cyril Ramaphosa, who ousted his scandal-battered predecessor last year, can win a full term.
At the centre of the shortages is South Africa’s state-owned power utility Eskom, which supplies some 90% of the country’s electricity, but has been rattled by years of mismanagement and alleged corruption involving senior management. On Wednesday, the company warned that it was technically insolvent and would go bankrupt by April unless it gets a multibillion-rand government bailout.
Saddled with some R420bn (around $30bn) in debt – much of it government guaranteed – Eskom has become Mr. Ramaphosa’s biggest political headache. The company’s failure to generate sufficient electricity is eroding already anaemic economic growth, while another bailout would add to the government’s rising debt load.
Moody’s Investors Service, the last of the big three ratings firms that considers South Africa’s bonds investment grade, warned this week that pumping more public money into the utility without a credible turnaround plan could trigger a downgrade to “junk.”
“Eskom’s current situation is the single biggest risk to South Africa’s economy,” Mike Fraser, chief operating officer of Australian miner South32, said at a Cape Town mining conference last week. The firm owns coal and manganese mines as well as aluminium smelters in South Africa.
Yet, the president’s plan to fix Eskom is putting him on a collision course with powerful factions in his own African National Congress. In his State of the Nation address last week, Mr. Ramaphosa announced Eskom would be split into three entities, separating electricity generation from transmission and distribution – a move that is set to lead to large-scale job losses.
Energy analysts believe that nursing the company back to health would require cutting nearly a third of its 48,000 employees, a painful blow to a country already suffering from 27% unemployment.
“We are at a moment in our history where we need to make difficult choices,” Mr. Ramaphosa told parliament Thursday.
On Wednesday, thousands of members of the powerful Congress of South African Trade Unions walked off their jobs protesting Mr. Ramaphosa’s plan to split Eskom. The unions, whose backing helped Mr. Ramaphosa win the ANC leadership in 2017, have warned that they could pull their endorsement ahead of the May 8 national election.
Government officials and Eskom’s board – installed by Mr. Ramaphosa last year – say the utility is failing on multiple fronts.
Its former chief executive, chief financial officer and a dozen other senior executives have been implicated in a government corruption scandal, in which a family with close ties to former President Jacob Zuma was allegedly handed billions of rand in contracts and other favours. The former executives, Mr. Zuma and the family all deny the allegations, which are being investigated by South African police and a commission of inquiry.
Amid the management failures, Eskom for years neglected maintenance on its ageing coal-power stations, which are now breaking down, Pravin Gordhan, the minister in charge of Eskom and South Africa’s other state-owned companies, told parliament. The completion of two new coal plants meant to make up for the generation shortfall, meanwhile, is seven years behind schedule and three times over budget, he said Wednesday.
“The issue of money mismanagement, getting rid of good people, replacing them with compliant people and in particular allowing the level of corruption that took place has all together damaged this very important institution,” said Mr. Gordhan, who was appointed by Mr. Ramaphosa. “Today we are dealing with the cumulative effects.”
In addition to a capital injection from the government, Eskom says electricity tariffs will need to increase around 15% annually for the next three years to cover its costs – a demand that is vehemently opposed by South Africa’s mining industry. According to the Minerals Council, an industry group, such an increase would render 95% of all gold-mining operations in the country unprofitable and hurt the platinum sector, jeopardising some 136,000 jobs.
Finance Minister Tito Mboweni, who has to present a new budget next week, has resisted bailing out Eskom and taking on more of its debts.
“This is the picture of a sieve,” he tweeted in December in reference to bailouts for state-owned enterprises. “I have come across people who think that the more water they pour into a sieve, the higher the possibility of filling it.”
Some South Africans say the blackouts will affect how they vote in May. “So close to the election, one would expect that things would be running smooth,” said Lungelo Motsamai, a tax auditor in Johannesburg. “These power cuts leave a sour taste in the mouth.”
Others are finding ways to adapt. Masechaba Tsoai, a retired domestic worker who lives in a small village in South Africa’s Eastern Cape province, says she has gone back to cooking on an open fire outside her home. “Life doesn’t begin and end with electricity,” she said. “I cook and boil our bath water there. We use candles as well.”
— Alistair MacDonald contributed to this article.
Write to Gabriele Steinhauser at [email protected]
