SA’s electricity crisis: A tale of mismanagement and politics – Andrew Kenny - Biznews

South Africa’s electricity crisis, marked by steep tariffs, crippling load-shedding, and Eskom’s mismanagement, has stifled economic growth and deindustrialized the nation. A legacy of ANC policies, affirmative action, and BEE, combined with corruption and poor planning, has driven Eskom into debt. Solutions lie in prioritizing reliable power through nuclear energy, skilled management, and depoliticized operations. Until political will aligns with practical energy strategies, South Africa’s economic recovery remains at risk.

Andrew Kenny

In the undemocratic era of apartheid, Eskom produced the world’s cheapest electricity, providing plentiful, reliable electricity for households, commerce and industry, and giving us many years of high economic growth.

In the democratic era of ANC rule, Eskom’s electricity prices have risen steeply. and there have been years of electricity shortages, electricity failures and blackouts (load-shedding), which have damaged our economy and caused deindustrialisation.

Our growth forecasts for the next ten years are abysmally low, thanks in large part to poor electricity. In October Eskom applied to the National Energy Regulator of South Africa (NERSA) for a massive 36% tariff increase for the coming financial year, something that never happened under apartheid. But you, the South African voter, voted for the ANC, which implemented policies that wrecked Eskom and caused rising electricity prices; and when you saw Eskom being ruined by these ANC policies you continued to vote for it; and even this year, while votes for the ANC went down dramatically, you still gave it more votes than any other party. Indirectly you voted for more expensive electricity. So, you must stop complaining and pay up.

Is this a reasonable argument? Probably not. But it does have some points to consider, which I shall now proceed to do.

Most of the public response to Eskom’s price hike, including that during the NERSA hearings, goes like this: “Why should we have to pay for Eskom’s corruption, incompetence and mad policies?”

A speculative answer is this: “Because you voted for a party whose mad policies were sure to increase electricity prices.” (By the way, the same could be said to British voters, now complaining about rising electricity prices. They voted for a Labour government that promised a huge increase in wind and solar power, absolutely guaranteed to result in soaring electricity prices.)

A more concrete answer is this: “Because you have to pay up, or else South Africa will go bankrupt.”

The much higher electricity prices Eskom are asking are indeed the result of Eskom’s corruption and incompetence and the ANC’s mad policies, which I shall list below. (Incidentally I should point out that even with Eskom’s higher tariffs, the price of South African electricity is not especially high by world standards.)

A main reason Eskom wants higher prices is to pay off its enormous debt, now standing at over R400 billion. If it defaults on this debt, South Africa’s credit rating will fall off a cliff. Investment here will dry up and we shall struggle to borrow from anyone. We must pay this debt, and there are only two ways of doing so: through our electricity purchases or through our taxes (which the government would use to support Eskom). Either way, we pay.

Made it much worse
The rot in Eskom began in the decade before the ANC took power – and made it much worse. Apartheid was a racial dictatorship causing suffering and humiliation to the black majority, but for most of the time it provided an excellent supply of cheap, reliable electricity. It did so by the simple method of leaving Eskom alone, to be run by its own engineers and managers, without government interference. It asked Eskom to give South Africa sufficient power and to cover its costs through electricity sales. Nothing else.

Eskom did so, building new stations on cheap debt and paying it off from its revenue. This worked well until about the late 1980s, when the white Eskom managers became stupid and lost sight of the fact that their only purpose was to supply electricity

They began to indulge in silly ideas. Sometimes they seemed to regard Eskom as an organ of social welfare, sometimes as a private company seeking maximum profits. Sometimes they asked for tariff increases far too low to cover costs (to provide cheap power for poor people) and sometimes far too high as if they were trying to impress their shareholders. (They have only one shareholder, the government, which is content if Eskom just covers its costs.)

They began racial preferment before the ANC took power, making some senior appointments on dark skin colour. At one stage, they believed Eskom had too much generating capacity and begged industries to build new projects using as much electricity as possible, guaranteeing them very low electricity prices indefinitely. The new aluminium smelter in Richards Bay is a result. They shut down power stations. When they realised the folly of these measures, they still refused to admit that we were running out of electricity. They refused to believe that the problem was lack of generating capacity rather than too much.

So they refused to build in the 1990s, when a schoolboy could have shown them by a simple graph that we would then run out of electricity by about 2007 – which we did, and from which we have never recovered.

The ANC, taking over government in April 1994, inherited these stupid ideas and added its own stupid ones.

Affirmative action considered a black skin as a criterion for appointing Eskom engineers, technicians and managers. Employment equity meant that Eskom should have over 90% black engineers and managers since black people make up over 90% of the population at large. Black economic empowerment (BEE) meant that Eskom’s purchases and contracts should first be with black companies rather than companies that provided the best goods and services at the lowest cost. Transformation meant kicking out the whites.

More important
Implementation of these policies was considered to be more important than providing reliable, affordable electricity.

By these standards, Eskom today must be considered a huge success: it did kick out skilled, experienced white engineers and managers; its senior managers got big bonuses for meeting their equity targets even if there were more blackouts; Eskom started buying very expensive, bad coal from little BEE coal miners long distances from the coal power stations, rather than cheap, good coal from the big mining majors right next to the stations.

And so we had years of blackouts, electricity shortages, very expensive and dangerous accidents at power stations caused by incompetence, massive corruption, and steeply rising electricity tariffs. (On Thursday an accident at Matla Power Station injured nine workers, one of whom is in a critical condition.)

Another reason for Eskom’s financial problems is the refusal of so many of its customers, especially municipalities, to pay for the electricity they get from Eskom. In the case of Soweto, householders get their electricity directly from Eskom, but here non-payment is as bad. In both cases, the fundamental problem of non-payment is political. 

Adding to Eskom’s woes was the wretched Renewable Energy Independent Power Producers Procurement Plan (REIPPPP). Eskom was forced to pay exorbitantly high prices for solar and wind electricity from private producers. Eskom then had to sell this electricity at lower prices, making a total loss on it.

Except in one case, solar and wind cannot produce dispatchable electricity – electricity when you want it – and so are essentially useless for the grid. (The one exception is concentrated solar power with storage, but this has proved prohibitively expensive, even in the superb solar conditions in the Northern Cape.) Usually, this non-dispatchable junk electricity is not too expensive but in the case of REIPPPP it was very expensive.

So this has added to Eskom’s costs. But renewable energy still provides relatively little of our electricity, thank goodness, and is not a major reason for Eskom’s problems.

Blessed relief
We have now been over 250 days without load-shedding. This is blessed relief. The rand has recovered 10% since the worst of load-shedding in 2023. Load-shedding ended for the simple reason that Eskom brought more of its stations into a better state of repair. It improved the Energy Availability Factor (EAF) of the power stations, meaning that at any time a larger percentage of them were available to make electricity.

Eskom’s electricity production reached its peak of 240,000 GWh in 2007. Production stopped rising not because of lack of demand but for lack of supply. If we had had enough electricity after 2007, electrical demand would have risen and so would economic growth.

Our industry and manufacturing would have been much stronger, and our unemployment much lower. As it happened, even though there was no increase in demand, and on the contrary a drop in demand, we still had load-shedding because we did not have enough operating capacity to meet even this feeble demand. This was because the coal power stations were falling to pieces through bad operation and poor maintenance.

We have now improved both, and it seems we now have enough available operating capacity to prevent load-shedding – for a while at least. How long this will last is not known. Much of the credit for the improvement must go to Dr Kgosientsho Ramokgopa, now Minister of Electricity and Energy. He seems a sensible sort, given to practical solutions rather than grand schemes and ideology.

The renewable lobby claims that increased use of solar photovoltaic (PV) panels by households and businesses has helped to end load-shedding. This is nonsense. Solar PV can only provide electricity in the few hours of the year when the Sun is shining, and not when it is most needed, especially in long, cold, winter nights.

Eskom itself could easily provide itself with electricity from PV panels more cheaply than that from households and businesses. It is just not worth its while. It is said that households are now buying solar panels to reduce costs rather than help during load-shedding. If Eskom were purely commercial, it could easily undercut them by charging very low tariffs during the day when the Sun was shining and very high ones when it was not, or having very high standing charges.

What now for our future electricity supply? The most obvious step is to stop all further wind and solar projects. They have everywhere proved an expensive disaster for grid electricity. The German economy is in great trouble because of them; Britain is going the same way, crippling its power supply and industry with massive expenditure on useless, staggeringly expensive wind turbines and solar arrays.

Best option
Nuclear is our best option, being safe, reliable, sustainable and affordable, but if we go out to tender for a new nuclear station tomorrow, it will be about ten years before it comes on stream. Coal has served us well, but it is the most polluting. (I refer to sulphur and nitrogen oxides and not to carbon dioxide, which is not a pollutant but a wonderful life-giving gas). I don’t think we should build any more coal stations. Natural gas is excellent, but we have very little ourselves and would have to import most of it.

The biggest problem is that we must build more power stations properly and run them properly. To do this we have to use the best available engineering, management and financial skills and use the best available equipment suppliers, contractors and materials at the lowest possible prices.

We cannot do this unless we scrap affirmative action, BEE, transformation and employment equity. And we cannot do that unless we get rid of the ANC. The problem is that it is difficult to find among the major parties any with sensible policies on energy. The DA rules Cape Town and the Western Cape very well − with the exception of its energy policies, where it believes in the disastrous green policies of wind and solar for grid electricity, and when it is often hostile to nuclear power, including South Africa’s best power station, Koeberg, 30 km away from Cape Town.

The DA is probably the worst party on the anti-science nonsense of climate alarm, believing all its tripe. I even heard a DA spokesperson declare that “climate change has made the weather impossible to predict”. (The weather system is naturally chaotic and therefore is, and always has been, mathematically impossible to predict, except roughly over a few days by numerical methods.) The EFF and MK do not seem to have any coherent policies on energy, and both seem enamoured with BEE, transformation and the other racial rubbish.

Has South Africa got the resources and the skills for ensuring an excellent future electricity supply so that we can make our economy grow, end our gross unemployment, bring prosperity to all and protect our beautiful environment?

Of course we have. All we need is to get our politics right.

Andrew Kenny is a writer, an engineer and a classical liberal

https://www.biznews.com/energy/2024/12/15/sas-electricity-crisis-andrew-kenny

This article was first published on the Daily Friend.