The government’s support for coal-fired power and reluctance to transition to renewable energy undermines potential for economic expansion and job creation in the renewable energy sector. Photo: Waldo Swiegers/Getty Images
Eskom has rejected Mozambique energy company Electricidade de Moçambique’s (EDM’s) offer to sell 100 megawatts of electricity to South Africa, citing high tariffs.
“After carefully considering the economic and technical parameters [of the deal], a decision was taken not to pursue importation from the power plant,” Eskom said in a response to the Mail & Guardian.
The decision comes six months after Electricity Minister Kgosientsho Ramokgopa and Mozambique’s energy minister, Carlos Zacarias, signed an agreement that would see South Africa procure power from Mozambique to lessen the effect of load-shedding.
The M&G understands that the tariff structures were flagged after both countries’ technical and financial teams met to discuss how the gas would be transferred to South Africa.
Two Eskom sources confirmed that the tariffs were double the acceptable amount. EDM did not respond to the M&G’s request for comment.
Last week, Ramokgopa said that after talks with Eskom, he would discuss the above-market tariffs with Zacarias.
“We will not be getting the Mozambique benefit. After having an engagement with Eskom now we understand the issues around the prohibitive nature of some of the asks from our partners. So what we have done is to initiate a discussion with my equivalent from Mozambique,” the minister said during a media briefing.
He added: “I don’t think we can expose the country to such tariffs. I am not at liberty to disclose what those numbers are, but take it from me, I don’t think you can arrive at any rational justification for that amount of tariffs.”
At the time the agreement with Mozambique was signed, load-shedding was frequently at stages five and six, necessitating Eskom’s call to neighbouring countries to come to its aid to provide an additional electricity supply.
The deal with the EDM was meant to gradually increase to 600MW after the conclusion of power purchase agreements between Eskom and the Mozambique company. This would have meant Eskom could have reduced its load-shedding by at least half a stage, bringing some relief to businesses and households.
The 100MW has been a bone of contention in the ruling party, which has previously called Eskom out for failing to act on the signed agreement between the two countries.
This has been a frustration for Ramokgopa, who, despite not having control of the Eskom board at the time, had been summoned by the ANC’s national working committee more than once to explain why Eskom had not taken steps to procuring the megawatts offered by EDM.
Ramokgopa’s spokesperson, Tsakane Khambane, said in September that the delay was caused by the government’s procurement processes.
“Because Eskom is a governmental institution, it is tied to Public Finance Management Act rules. It does not have the flexibility to go and procure megawatts without accountability, which is why it has to go through a process to acquire these megawatts.”
“Eskom is the one talking to EDM because it has the ability to house the megawatts that we receive,” Khambane said.
Early this month, President Cyril Ramaphosa gave Ramokgopa powers and influence over the Eskom board.
Eskom and the EDM’s relationship has been fraught following non-payment by the Mozambique company.
Discussions are underway between the two utilities over a bill that is deemed unpaid by Eskom. In its December 2022 integrated report, which looks at overall performance, Eskom said the EDM owed R579 million for power supplied to Maputo.
Eskom said debt management with the EDM remained difficult because R350 million was in dispute between the utilities.
“Only EDM of Mozambique remains in arrears, with R579 million outstanding at year end, of which 88% is overdue. In June 2022, we submitted a settlement offer on the disputed amount of R350 million, which EDM declined. The mediation process is still under way,” Eskom said.
South Africa purchases a maximum of 1 400MW from Mozambique’s Cahora Bassa Dam, representing the most substantial external source of power imported to the country.
Energy expert David Walwyn said South Africa should focus on building up the capacity it receives from independent power producers rather than expecting to be rescued by neighbouring countries that are experiencing their own energy shortages.
He added that negotiating with Mozambique would be a fruitless exercise. “Going back to Mozambique is pointless because Mozambique does not have power to give us, nor do any of the neighbouring countries have excess power.”