Page 28 - Energize January 2021

VIEWS AND OPINION

South Africa’s electricity supply:

What’s tripping the switch?

by Prof. Rod Crompton, Wits Business School

Interruption in the supply of electricity is now a common occurrence in

South Africa. Besides breakdowns and incidents of cable theft, the biggest
cause of power outages is load shedding – or what Eskom euphemistically
calls “load rotation”. The damage these outages have caused to the
economy are massive and resulted, even before the onslaught of Covid-19
in 2020, in economic contraction and a sharp increase in unemployment.
It’s time, again, to analyse and solve the problem.

Prof. Rob Crompton, director of the African Energy Leadership Centre at Wits
Business School, a council member of the South African Association for Energy
Economics and a non-executive director at Eskom, addresses the problem here.

skom, South Africa’s state-owned power utility, has a Government has taken some steps to try to fix Eskom.
litany of financial and operational problems. In 2017 the In 2018 a new board was appointed with instructions to clean
Goldman Sachs Group declared it the biggest risk to the up corruption. It removed several senior managers and is pursuing
ESouth African economy. Several cabinet members have thousands of employees with conflicts of interest. President
said so too. President Cyril Ramaphosa declared that Eskom is Ramaphosa appointed a task team to advise him. Their report has
“too big to fail”. not been made public.
The first huge problem is debt of R488-billion which Eskom The Minister of Public Enterprises, Pravin Gordhan, appointed
cannot service, and of which, R350-billion is guaranteed by a Technical Review Team to advise on operations. Eskom is trying
government. Sales volumes declined by 4,7% between 2009 and to implement its recommendations. Gordhan followed with an
2019, based on data in Eskom’s annual integrated reports. “Eskom Roadmap” (2019) announcing the intention to separate the
Operational costs also increased by 30% in five years. power utility into three subsidiaries: generation, transmission and
The energy availability factor – what’s available from power distribution. This is essentially an attenuated version of reforms in
stations – has declined by about 20% over the past 20 years as the 1998 White Paper on Energy Policy. Previous attempts to
Eskom struggles to repair and maintain its previously neglected implement the White Paper reforms were unsuccessful.
and ageing fleet of power stations. This has resulted in increasing Eskom says it’s making good progress with the roadmap, but it
load-shedding, which is damaging investor sentiment. has a long way to go to return energy availability to historical highs.
The utility also has environmental problems: emissions from its
coal-fired power stations exceed permitted levels and have done Debt
so for many years. The elephant in the room has been the gross debt of R488-billion
at March 2020. The government appointed a chief restructuring
The problem of a culture of non-payment officer but no report and no solutions to the debt problem
Eskom sells about half of its power to municipalities and the emerged. Taxpayers have kept Eskom afloat by means of
balance directly to customers. Malfeasance and mismanagement government bailouts to the tune of R188-billion – with more to
have damaged many municipalities. In 2019/20, municipalities come. These roughly cover the interest but not the principal debt.
owed 71,7% of what they’d been invoiced. An anti-apartheid
electricity payment strike by Soweto residents has continued Possible solutions
through 25 years of democracy. Despite Eskom’s recently more Either taxpayers or electricity customers, or a combination, will
aggressive approach to debt collection it had R38-billion in have to pay Eskom’s debt. There has also been loose talk of using
receivables outstanding in June 2020. funds from the Unemployment Insurance Fund and the
There have also been allegations of corruption throughout Government Employees Pension Fund, but no plan has emerged.
the organisation. The longer government dithers over this decision, the bigger

energize | January 2021 | 26