The government has proposed that allocations to Eskom through the debt relief programme be cut by R2 billion, citing the power utility’s failure to dispose of its finance company. (Getty Images)
South Africa’s energy sector — a quagmire if ever there was one. Massive power cuts, a utility challenged by sabotage and theft and an inability to provide power. High stages of load-shedding mean long hours with no power throughout the day. In some cases between nine and 12 hours with no power.
The latest debacle has seen CEO Andre de Ruyter removed from his duties with immediate effect, after a scathing interview. In it, he fingered ministers for stealing just energy transition funds and bleeding the utility dry. Let’s be real, this is no pilfering of little bits of money. He alleges there is a massive amount of money being stolen, money the utility desperately needs.
Then we have our leader, our president Cyril Ramaphosa, saying load-shedding is not his fault. My colleague Emsie Ferreira reported him saying, “It is now accepted that municipalities are in law required to provide water and electricity to their people as a matter of public duty.”
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“This duty does not lie with the president or any of the national departments …” Here he lies, passing the buck. Okay, but we know Eskom’s problems are ubiquitous, we know the utility and the country are in a really dark place, literally and figuratively.
So how can we fix it? Now, the natural question you must ask is what on earth does a journalist with no experience in power generation, electrical engineering or any related field know about fixing a country’s electricity?
The answer is nothing, I have no idea how to fix any of these issues. But what I can do is tell a story, I can tell you a story of other countries and what they have done when faced with power cuts and shortages. Maybe, just maybe, in these stories lies a solution for South Africa.
Vietnam
Let’s start with Vietnam. The country, since the year 2000, has experienced a massive demand for energy. So how did it cope? A Harvard paper described how “Vietnam has increased the supply of electricity to its economy since 2000 by eight times and extended supply to virtually every village. EVN, the state monopoly utility, has reduced blackouts and increased the quality of electricity since 2010.”
The country made changes to its legal and regulatory frameworks. This basically opened up the electricity market to competition but without affecting the utility supply.
A fully lit Ho Chi Minh City. (Maika Elan/Bloomberg via Getty Images)
There was an increase in solar projects and renewable energy projects reached about 5 500MW by the end of 2019. There are generous feed-in tariffs which play a significant role in incentivising power producers. There are also income tax and lease payment exemptions which play a role. The use of off-grid systems, such as small hydropower, made a massive difference in electrifying rural communities.
Crucially, Reuters reports, the private sector plays a large role in the country’s electricity stability. “The role of the private sector, in particular foreign investment, is increasing in the Vietnamese electricity market. Most foreign investment takes the form of build-operate-transfer projects, where a foreign investor builds a power generation project, operates it for a certain period of time to gain profits, and then transfers it to the Vietnamese government.”
One of the most important steps the country took was to ensure that there was power distribution and transmission infrastructure that could accommodate small-scale energy from hydropower.
China
Around 2003, China faced an energy crisis where it had regular blackouts and struggled to keep the power going. They weren’t the only ones, countries such as Greece and Colombia also went through power cuts and energy shortages.
China, like many other countries, went on the path of untangling the strands of its electricity supply. What it did was separate the generation and transmission grids. Generation was untangled and was removed from being a monopoly.
One of the immediate steps taken was the government allowing local governments to make fast decisions regarding generation, without the lengthy process of getting government approval. At the same time, the central government embarked on an unbundling process, involving a market-based restructuring.
Roy Havemann explains that “generation was untangled from the rest of the state-owned monopoly in China. Between 2003 and 2006, new-generation companies added over 237 500MW to the Chinese grid. That’s the equivalent of delivering nearly 10 Eskoms in three years.”
Not all of it was untangled, some parts were kept under state control and there was a mix of private companies and state-owned ones. This diversification allowed it to stabilise its energy crisis.
Separation of the different entities could help reduce South Africa’s power cuts.
Unbundling
There are plans in place to separate Eskom into generation, transmission and distribution.
The 2019 roadmap for Eskom says: “Restructuring or ‘unbundling’ into separate subsidiaries under Eskom Holdings will allow management focus, improve efficiency, create greater transparency around performance, provide greater protection against corruption and rent‐seeking, and will give capital providers more visibility of the component parts of the sector, resulting in more investment comfort.
“This new business model for Eskom must provide reliable, affordable, economically competitive and environmentally sustainable electricity that will drive inclusive economic growth in the context of the Fourth Industrial and Green Revolutions.”
These plans are lagging, especially the separation parts. They require political will. Perhaps the new acting CEO can drive the unbundling of Eskom. The treasury and the presidency note it as a priority and we will have to wait and see if and when it does happen, it is effective in cutting load-shedding.
There is also the problem of Eskom’s debt. Cutting that down will free up funds that can be used elsewhere. The utility needs stability, and the De Ruyter and corruption sagas can be put to bed, the better. Then the focus can be on putting an end to load-shedding.