After 14 years of blackouts, the president has promised to expedite load-shedding’s finale. This is as the social compact to fix Eskom has seemingly stalled. (Photo by TADEU ANDRE / AFP)
Cyril Ramaphosa, whose presidency began a decade after South Africa experienced its first bout of blackouts, says he will soon announce a new plan to solve the country’s energy crisis, even as previous efforts have stalled.
On Monday, Ramaphosa declared in his weekly open letter that the government “can and will do more to end load-shedding”, saying his administration will, in the coming days, “be able to announce a comprehensive set of actions to achieve much faster progress”.
The government and other stakeholders already signed off on a plan to end load-shedding a year and a half ago: The compact to support Eskom for inclusive economic growth.
Through the compact, stakeholders accepted that solving the energy crisis and fixing Eskom was a matter of urgency. However, the state-owned utility’s current state of decline, and the vulnerability of the power system, would suggest that this urgency hasn’t quite been followed through — and social partners agree.
The president’s new promise comes after the country was forced to endure stage six load-shedding for the first time since 2019, as an Eskom wage dispute imperilled the already fragile energy system.
The more severe blackouts prompted a number of analysts and institutions to put forward their solutions to the country’s energy crisis, with some imploring the government to declare an energy emergency.
Buckling
Matthew Parks, labour federation Cosatu’s parliamentary coordinator, said the labour federation supported plans that would expedite solutions to the country’s electricity woes, noting that far too little work has been done to fulfil the Eskom compact’s promises.
Through the compact, stakeholders committed to help Eskom become financially viable, restructure the utility, tackle corruption, procure more energy generation and mobilise the public and private sectors to invest in infrastructure. Some of the compact’s promises have been realised, others are still a work in progress.
One example of a work in progress is the undertaking to clear Eskom’s debt, which at the end of 2021 stood at a breathtaking R392.1-billion. Eskom’s unsustainably high debt has hampered its ability to maintain some of its ageing coal-fired power stations, a predicament that has fed into the country’s load-shedding crisis.
Last year, the utility had managed to reduce its debt burden compared to a year prior, when it amounted to R463.7-billion. Eskom relies on budget support to service its debt.
Noting this positive development, Parks said the government has not committed enough resources to clearing Eskom’s debt. The Eskom compact gave social partners 12 months from the compact’s signing in December 2020 to realise efforts to jointly mobilise resources for Eskom.
Prior to the compact’s signing, Cosatu made a proposal to reduce the utility’s debt through a special purpose finance vehicle funded by the Public Investment Corporation (PIC), the Development Bank of Southern Africa and the Industrial Development Corporation.
The PIC’s largest client is the Government Employees Pension Fund, which, with assets in excess of R2.1-trillion, comprises 89% of the asset manager’s portfolio.
Cosatu’s proposal received blowback from those who said it would jeopardise worker pensions. However, some economists have pointed out that solving Eskom’s liquidity crisis through a finance vehicle would free up the fisus, which is saddled with servicing the utility’s debt.
In February, during a press conference ahead of his maiden budget speech, Finance Minister Enoch Godongwana said his department had “come to the conclusion some fiscal intervention is probably necessary” to solve Eskom’s debt problem. The budget allocated R43-billion over the next three years towards settling Eskom’s debt.
“A significant part of the problem is about resources. Eskom is buckling under its debt burden … Eskom needs to get its debt down to R200-billion. So we have asked government to finalise a debt relief package, because at least that is under our control,” Parks said on Wednesday.
“That can immediately free up cash within Eskom, so it can focus on maintenance. That is the fastest way to address load-shedding, focussing on maintenance.”
‘Dragging on’
Parks noted that reducing Eskom’s debt is only a short-term solution, and that getting additional generating capacity on the grid is the key to realising a more sustainable energy system.
The government should cut the red tape that has been slowing this process down, he said. The Eskom compact states that the government must remove all barriers hamstringing new power projects.
As Ramaphosa noted in his letter this week, one of the first steps he took in 2018 was to revive the renewable energy procurement programme. Last year, the president announced a decision to amend the Electricity Regulation Act to lift the threshold for companies to produce their own electricity without a licence to 100 megawatts. “This simple reform,” Ramaphosa said this week, “has unlocked a massive potential pipeline of investment.”
These reforms give credence to Ramaphosa’s assertion that the government “has already taken several important actions to address the shortfall in electricity supply”. However, Business Unity South Africa’s head of energy Happy Khambule said progress relating to the Eskom compact has been “dragging on”.
“In 2019 and 2020, there was a lot of stuff happening. There was a lot of procurement being put out. You had all the work on the IRP [integrated resource plan]. You even had Eskom come out with revisions to their pricing methodology. Basically, you had a lot of proposals happening,” Khambule said.
“But that has just shifted now to more like reporting back, figuring out whether we are still on track — nothing really about pushing an urgent response in terms of implementation. And even at the level of discourse it has simmered down to more sharing whether or not things are happening.”
Regressing
Thulani Tshefuta, who signed the Eskom compact on behalf of the community constituency, agreed that not enough has been done to realise its commitments. “We are not only stagnant,” he said, “but we are regressing in our battle for an affordable and sustainable supply of energy.”
Tshefuta noted the devastating impact rolling blackouts have had on communities “who cannot go about their daily lives”. Similarly, the country’s energy woes have caused an “existential crisis for business”, Khambule said.
“Business has spent a lot of resources trying to meet government halfway on a range of issues … Then when we have load-shedding escalated to such a high level, when we know what should have been done and how it could have been done is really, really worrisome.”
Khambule said while the compact signalled a group effort, the buck stops with the government.
“Everyone has come to the table. Even labour has come to the table … So we are all willing to make concessions. The private sector has made a lot of concessions in itself and also started participating in areas of providing capacity to government, beyond what it generally does,” he said.
“So the buck does stop with government. Because at every point when we have reached impasse, whether it be a small bureaucratic or procedural impasse, the government just forgets about the initial agreement and then wants to renegotiate a new social compact.”
In February, Ramaphosa announced that social partners would devise a new social compact aimed at growing the economy and creating jobs.
The announcement, made during the president’s State of the Nation Address, stumped some commentators who noted that social partners had already agreed on an economic recovery plan, which built on certain aspects of the Eskom compact. Despite a 100-day deadline, Ramaphosa’s new compact has not yet come about.
“We can’t stay in a state of negotiation … We already know what we need to do and what each social partner needs to do,” Khambule said.
“It is just that the state, unfortunately — whether it be because of its own desires or due to its own internal inconsistencies or challenges — has started to produce a very inconsistent way of addressing a shared understanding of a common problem.”
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