A crisis in darkness

Since Eskom’s existential power crisis in late 2007 and the introduction of load-shedding, South African’s have been forced to bear the brunt of an unreliable power grid. David Nichollas, Eskom’s former senior manager for over 30 years, sat down with the Free Market Foundation in Bryanston to present the technical, financial and political factors that influenced the situation that the country now finds itself in.

Nichollas was the head of nuclear energy at Eskom before he was ultimately let go, along with other officials, when Eskom underwent a large-scale management change – cutting down its management personnel tally down from 21 officials to nine.

The power utility had seen a number of changes as the problems worsen over the years. According to Nichollas, in the last 10 years, Eskom has had 12 CEOs. “So maybe you need to slow down with the restructuring and realise that the CEOs may not be the problem. This is a policy problem,” he said.

Load-shedding hit the country for the first time in late 2007 disrupting businesses, mining operations and impacting households. “We were wrong. Eskom was right,” said former President Thabo Mbeki said in his formal apology to the nation. Mbeki was referring to the increased demand for electricity and the government’s failure to make larger investments into the power utility’s generation capacity.

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During this time, many economists blamed the shift in the country’s economic balance for the capacity woes. “If you say that the economy changed here I am going to argue that you mean it was worse than the interest rates of 25 per cent in 1984? No, it wasn’t. The one thing that changed was the load reductions. It says that for the first time since 2006 we shed 650MW at peak – we turned someone off,” said Nichollas.

From there on the electricity tariff was driven by a lack of sales. “From 2007 onwards, supply determined consumption. Anybody who uses the word demand is fooling themselves because the supply is supply-consumption.”

Nichollas noted that at Eskom the engineers were told not to worry because the world was changing regardless of the prediction that the country would run out of power by 2008. “Unfortunately that is not true. Yes, we did not slow down because of the 2008 crisis but the capital price of money was driven to virtually zero so the cost of financing major projects went away – nothing was built and no power was used.

“Because we are a country that is highly driven by mining and manufacturing, the lack of investment into this industry is what hit the economy. Why would you invest in a heavy plant when you can’t put power into it?”

“We sat here discussing should we build more [power] plants but now you have a situation that is very important to understand – Eskom was not bursting to build plants, they were sitting with a small number of engineers saying that we should start building now.”

In 1998 the government told Eskom that it did not need to build more power plants, said Nichollas. A lack of infrastructural investment and maintenance would eventually put the country into complete darkness. “It is like buying a motor car – you drive it on the road and if you decided not to do maintenance or minimal maintenance for the first half of its lifespan, you will start to have serious problems. That is how we ran out coal fleet so this wasn’t some unsurprisingly shock-horror thing.”

Because the general overhaul on maintenance lasted between six to seven years, the second major power crisis came in 2012. “In 2010, Eskom was also told to stop doing maintenance all together because we had a World Cup. All this time you have been running ‘keep the lights on’ as a big driver. To do that you end up telling people that whatever you do is okay as long as you keep the lights on. You just end up destroying company policies and processes along the way.”

Nichollas noted that the future of the country is weighing in the balance because Eskom has such a big stake in the economy. He has, however, remained highly respected in the energy industry with a reputation for getting things done. Earlier this year minerals and energy minister Gwede Mantashe appointed the former chief nuclear officer as chair of the Nuclear Energy Corporation (Necsa).

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