Security of energy supply can be an advantage in securing investment, but in SA, load shedding is a “significant investment constraint,” president Cyril Ramaphosa’s economic adviser Trudi Makhaya has warned.
The economist was speaking at parliament on Tuesday, addressing journalists at a briefing on SA’s second investment conference, set to be held in November in Sandton, Johannesburg. Trade and Industry Minister Ebrahim Patel was also present at the meeting to outline what the conference would entail.
The conference is part of President Cyril Ramaphosa’s drive to raised R1.2trn in five years. Last year raised some R300bn in investment commitments.
This year’s conference will see half of Cabinet, along with SA Inc., engaging with local and foreign investors to put forward the value proposition of SA as an investment destination. The conference will also be an opportunity to provide an update on the progress of investment and policy commitments made last year.
Responding to a question on how load shedding might impact SA’s value proposition, Makhaya spoke frankly, saying it would be an obstacle in securing investment, but that there has been a concerted effort by government in the past 12 months to help address the challenges at Eskom.
Eskom reintroduced load shedding last week, following the failure of a conveyor belt carrying coal from Exxaro’s Grootgeluk Mine to Medupi Power Station, in Limpopo. Eskom expects the conveyor belt to be repaired by the end of the week, Fin24 previously reported.
“No one can quibble with the idea that it is a significant investment constraint,” Makhaya said of load shedding. “We used to pride ourselves for our energy as an advantage in terms of investment and now we are in different position,” she said.
Government and National Treasury have been thinking through the financial problems at Eskom, as the power utility faces mounting debt of R450bn. National Treasury has put forward a Special Appropriations Bill that would see Eskom receive an additional R59bn for the next two years to service its debt, over and above the R69bn allocated by Treasury for the next three years to aid the power utility in its turnaround.
“Those cash injections were not a blank cheque. There were clear requirements in terms of reconfiguration imposed on the entity, to ensure the money has an impact,” Makhaya said. The Chief Reorganisation officer appointed, Freeman Nomvalo, will be instrumental in making sure Treasury’s directives are realised, she added.
There have been many interventions to keep Eskom going in the past 12 months, with all these interventions consolidated holistically in a strategy to stabilise the operations, governance and financial sustainability of Eskom. The paper will be released Ramaphosa and backed by the Cabinet, she said.
It is expected to fit within the Integrated Resources Plan, for 2019 which was gazetted last week.
Makhaya said there are clear movements to make sure key decisions are taken in setting up a road map to ensure Eskom is not a constraint.
Commenting on the shortcomings in the performance of state-owned enterprises, Patel said entities like Eskom and rail and ports company Transnet are critical for SA’s economic growth.
In terms of the progress being made at these entities – including addressing the cost of state capture through clean-up efforts led by Public Enterprises Minister Pravin Gordhan – Patel admitted more must be done. “We have not seen sufficient improvements, and my colleague Pravin Gordhan has been working actively to turn it around,” he said.
“We need more than that. We need an energy utility that is appropriately structured and well managed. We need a logistics company able to bring down the cost of moving goods across the country, underlying this is the opportunities of the African continental free trade agreement,” he said.
Patel said when it comes to policy certainty from the IRP2019, investors want to know there is a plan.
“[Investors] look for the long-term plan. Of course, it does not help the business when there are power outages as we have seen recently. But critically for them is that the state has a plan,” Patel said.
The IRP outlines how government plans to diversify energy technology and energy sources and it creates opportunities for private sector investment in energy, he added.
In his most recent newsletter to the nation, Ramaphosa said that non-payment of electricity is partly contributing to load shedding.
“Eskom is owed huge amounts of money by individual users. This is the time for a frank discussion on the payment of owed money to Eskom by individual users. The culture of non-payment exists in several parts of the country.
“Boycotting payment for services had a place in apartheid South Africa. It was an effective tool to mobilise communities against an unjust system. But it has no place in present-day South Africa. If public utilities like Eskom are to survive, then all users need to pay for the services they receive,” the president said in his newsletter.