Government must ‘privatise Eskom or risk further ruining of SA’s economy’

As South Africa on Tuesday marked 100 days of Eskom’s adverse load shedding, which has come at a huge cost to the taxpayer and business, experts have warned government to either privatise the embattled state-owned power utility or risk further ruining of the South African economy and investment prospects.

This as outgoing Eskom CEO André de Ruyter told Parliament of the troubled entity’s two-year electricity generation recovery plan – unveiling a roadmap, which he assured would end rolling blackouts, requiring energy availability factor (EAF) recovery, additional capacity and government enablers.

In terms of the proposed medium to long-term turnaround strategy, said De Ruyter: “In the short-term, the most viable solution to minimise load shedding is to ensure that Eskom has the funds to run the OCGT (open-cycle gas turbines) at their maximum capability.

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“This could save up to two levels of load shedding. The expedited return of Kusile (power station) units1, 2 and 3, could add over 2100 MW (megawatts) to the grid.

“Current indications are that it will take at least a year, but an expedited solution is being investigated.”

De Ruyter said a target of 2 600MW was “delayed due to Nersa (National Energy Regulator of South Africa) concurrence and alignment on procurement mechanism with DMRE (Department of Mineral Resources and Energy)”.

Eskom privatisation ‘only option’

But, to Wits Business School economics professor Jannie Rossouw, privatisation of Eskom, was the only option left to address the country’s ongoing electricity crisis, which according to Energy Minister Gwede Mantashe, was costing South Africa at least R1 billion a day.

Said Rossouw: “South Africa has suffered load shedding since 2008 and an uninterrupted period of loadshedding of 100 days.

“Due to this interruption, we have low economic growth, with a population growth being higher than economic growth per capita basis, making us all poorer.

“The government does not have a clear plan to fix Eskom and the only solution left is to allow the private sector to take control of the situation and go for large-scale private electricity generation.

“Eskom is on course to become an after-hours electricity generator when solar power is not available.

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“It is in a serious financial trouble – among another reasons – owing to mismanagement and expensive contracts.

“The only way to fix Eskom is to publish all its contracts – past, current and in the future – for public scrutiny, so that it can become obvious where the money really goes to.

“It has become abundantly clear that the government has no ability to run state-owned enterprises and should rather privatise to salvage whatever is left.

“We can no longer continue with this crisis.

“A state of disaster with respect to Eskom, will change nothing.”

State of disaster

University of Johannesburg associate economics professor Peter Baur said a state of disaster would lead to “the risk of social and economic policies, which could inevitably impact on market efficiency and limit accessibility – with long-term economic consequences”.

“Accelerating access to the energy sector, with emphasis on removing barriers to participation, would possibly give international investment additional impetus to invest in innovation and technology – to help stabilise and restore energy production.

“The possible impact of such investment, would significantly impact on economic growth, create possible job opportunities and assist in accelerating the potential of meeting global economic development goals,” maintained Baur.

‘Political interference’

Energy expert Ted Blom, blamed the Eskom crisis on “political interference”.

”For the intervening period, load shedding is here to stay.

“They also talk about maintenance, but there has not been much going on, because De Ruyter has been holding back on the budget.

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“The money has not been made available when needed, with delays going for up to two years.

“Maintenance has not been professionally conducted and there has been no properly thought-out plan and programme of action,” said Blom.

-brians@citizen.co.za