Covid-19 puts Eskom’s integrated resource plan at risk

The combined effect of the coronavirus pandemic and downgrades of the country’s sovereign credit rating place the availability of financing for the implementation of the integrated resource plan (IRP) at risk. 

This is according to Eskom’s social compact implementation plan, agreed to by social partners at Nedlac in September, which identifies obstacles to the implementation of the IRP. 

If the obstacles are not addressed, it could result in the generation capacity not meeting the IRP targets, according to the implementation plan. 

The plan is expected to be presented to cabinet ahead of the medium-term policy statement to be presented by Finance Minister Tito Mboweni on 21 October. 

As a result of the downgrades of South Africa sovereign debt to junk by rating agencies, the country fell out of the FTSE World Government Bond Index earlier this year, which means the cost of borrowing has increased. The downgrade came amid the pandemic that has so far exacerbated the country’s already weak economy. These factors may increase the cost of expanding the country’s energy generation. 

The plan calls for the finalisation of legislation and regulations, the removal of barriers to the implementation of the IRP and the financial stabilisation of Eskom.

The IRP was released last year and sets out the government’s plan to solve the country’s energy crisis by generating electricity through a mix of sources, with renewable energy accounting for a large portion of it. The IRP stipulates that the move to renewable-based energy generation should be done by 2030.

Eskom has a R450-billion debt. “Consumers who use electricity (other than the provision for free basic electricity) must pay for it; industrial and public sector users must pay timeously for electricity consumed, and municipalities must forward monies collected for the sale of electricity to Eskom within the contractual periods,” the plan reads. 

But the commitment for consumers to repay their debts to Eskom could be hampered by the negative effect of Covid-19 on consumers’ finances. 

For the recovery of the R28-billion owed by municipalities, the implementation plan calls on the South African Local Government Association and the department of cooperative governance and traditional affairs to jointly develop a review of the municipal electricity collection and payment systems. This is scheduled to be completed within the next three months. 

Ways to support Eskom’s debt recovery are expected to be developed by all social partners within the next two months. 

The social partners have agreed to set up a task team that will play an oversight and monitoring role and will report to the Presidential Working Committee on the progress made on the overall implementation of Eskom’s plan. 

The department of mineral resources and energy recently gazetted the long-delayed section 34 determinations that are to bring about 11 800 megawatts of power to the grid from independent power producers (IPPs). 

The IPP Office is expected to announce the winners of the bid to procure 2 500MW of emergency power in December. The additional generation capacity is due to be plugged into the grid within the next 18 to 24 months.

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Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian

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