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Africa|Coal|Energy|Financial|Power|Resources|Solar|Maintenance
Africa|Coal|Energy|Financial|Power|Resources|Solar|Maintenance
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Taking stock

Photo of Terence Creamer

19th November 2021

By: Terence Creamer
Creamer Media Editor

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South Africans are approaching the prospect of ongoing load-shedding with a mixture of anger and resignation.

The anger manifests mainly in the form of predictable calls for the resignation of the current Eskom board and CEO.

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Such calls are unjustified mainly because there is no simple fix to a problem that has not only festered for 14 painful years but was also deepened by the actions of previous executives. Without even a glint of remorse, some of these individuals are quick to express public glee every time the utility struggles to keep the lights on. To add insult to injury, they even seek to sow discord within Eskom and with ongoing claims of incompetence and disharmony.

Fact-rich investigative reporting shows that the coal fleet’s current fragility is largely the consequence of long-standing poor maintenance practices and poorly designed incentives. In addition, the refusal by previous Eskom leaders to conclue legitimate power purchase agreements, which stalled government’s electricity procurement for more than six years, has resulted in an energy deficit that has left no time and space for proper maintenance.

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The attitude of resignation is as worrying, however, as it is letting the current political, regulatory and, to a certain extent, even the technocratic leadership off the hook. In the most extreme cases, this attitude is manifesting in rising emigration, as wealthier South Africans perceive the ongoing electricity crisis as yet another signal – along with the July insurrection-turned-mass-looting – of the country’s inevitable decline.

There is no good reason for South Africans to accept that this crisis is permanent, however.

To be sure, the Eskom crisis has lingered far longer than it should have and is set to worsen before it improves. But while the current leadership may make mistakes, these will be made without malicious or corrupt intent. Therefore, with the right policy and regulatory support, the crisis can be overcome.

What would this entail?

For one, we have to introduce more private megawatts more quickly.

Secondly, the internal impediments to an Eskom turnaround have to be addressed once and for all, including: the painful matter of the unsustainable debt burden, part of which government now has to absorb; the necessary shift to cost-reflective tariffs, as wells as a tariff structure that caters for both volumetric and capacity charges; and the vertical separation of Eskom into generation, transmission and distribution businesses that have the financial basis to raise the debt they need to invest.

Third, South Africa must position itself to capitalise on the fact that it finds itself in a transition sweet spot, owing largely to the triumvirate of low-cost land, potent solar and wind resources and falling renewables costs. With the coal fleet mostly written off, the shift will carry few stranded-asset risks and can even be used to crowd in low-cost concessional climate finance.

All this can only materialise, however, in a context of genuine political will and policy foresight. Too much to ask?

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