[This is a Liberal analysis. I'm sure the ANC and the Blacks are more to blame. But anyway, it will give you some background. Jan]
Who ruined South Africa’s electricity supply, which was once the best in the world? Was it Eskom? The ANC? Other malign influences? Other idiocies?
Actually it was all of the above, although this seems little understood. Recently the topic and the attending blame game became more intense.
In parliament last week, there was a heated debate on the wretched state of our electricity system, in which Pravin Gordhan, Minister of Public Enterprises, made muddled excuses for Eskom’s woeful performance and then gave a spectacularly unconvincing assurance that the ANC would put everything right. ‘We are the people who are trying to fix institutions like Eskom. We will succeed at the end of the day.’ This must have caused a run on candles and diesel generators.
Last month, before parliament’s Standing Committee on Public Accounts (SCOPA), Ms Busisiwe Mavuso, an Eskom board member, who believes strongly in transformation, accused the ANC of meddling in Eskom’s affairs and making them worse. The chairman, Mkhuleko Hlengwa (IFP), accosted her, saying her remarks had no place in the meeting. She walked out. (He has since apologised). Was she right to blame the ANC rather than Eskom for our energy calamity?
It is perfectly true that almost every public institution and almost all of our infrastructure, which had been working reasonably well before 1994, have been ruined since the ANC came to power. Passenger rail, freight trains, ports and harbours, SAA, municipal water supply and sewage, and Eskom – all have been crippled. Much of this is because of plain looting and corruption by the ANC. But probably more is because of their official racial ideology, which includes transformation (kicking out skilled whites); affirmative action (making appointments on skin colour and political affiliation rather than merit, qualifications and experience); BEE (procuring shoddy goods and services at high prices from ANC chums and cronies); and employment equity (striving to ensure that whites, who are less than 8% of the total population, are also less than 8% of any profession – unless, of course, they are teachers at a posh school to which the ANC elite sends its children).
Eskom has suffered badly under these destructive policies. But Eskom has suffered other problems too, and other destructive policies from outside the ANC.
The rot in Eskom began in about 1990, before the ANC came to power. Senior white Eskom managers were mostly to blame. They had the insane idea that Eskom had too much generation capacity and were actually encouraging projects that used a lot of electricity. In 2006, a year before we ran out of electricity, Eskom signed up to supply electricity for a big new aluminium smelter at Coega!
In the election campaign of 1994, the ANC promised ‘Jobs! Jobs! Jobs!’ and 6% economic growth. (Both promises were quite reasonable for a developing country with all the advantages of SA in 1994.) Such economic growth would have required a massive increase in electricity generation.
Yet neither Eskom nor the ANC wanted to build more stations. This was Eskom’s original sin, the mother of all its subsequent problems: the failure to build power stations when by the simplest calculation, by the most obvious graph, by a chorus of commentators (including me), it was blindingly obvious we had to have them.
Actually economic growth under the ANC was much lower than predicted but still we ran out of electricity in 2007, which delivered a shattering blow to the SA economy, from which it has never recovered.
A strange mixture of fashions and ideologies, coming as much from the white managers of Eskom as much as the black deployed cadres, maybe more so, caused Eskom to make all sorts of stupid decisions. At the time there was a worldwide fashion for privatising electricity supply.
I believe strongly in the free market. I believe that private enterprise will nearly always be more efficient than state enterprise – but not always. Electricity generation is the glaring exception.
A well-run state generator will always be more economical than a private one for the simple reasons that its cost of capital is lower and it is content with a very low return and a long payback time. No privatisation of electricity anywhere has ever brought down the final prices of electricity.
Yet the ANC, whose default ideology is Marxist, published the 1998 white paper on electricity, which vaguely – sort of – suggested all future stations should be built by the private sector. Of course it was impossible for the private sector to compete with Eskom, so nothing happened.
But the Eskom managers went along with this mad thinking. Sometimes they behaved as if Eskom was actually a private enterprise seeking to maximise profits. After asking absurdly for low price increases from Nersa, they suddenly started asking for absurdly high ones on the grounds of a high Beta risk. (Beta is a measure of the volatility of a company’s investment risk compared with that of sovereign debt. The true Beta for Eskom is zero since it is essentially sovereign.) They kept on making crazy excuses for not building new stations.
Finally, the ANC reversed its position and decided Eskom could build again. It chose to build the huge, horrible coal stations of Medupi and Kusile, of new one-off designs rather than just using again old proven designs. Both stations were cursed with corruption, bad contracting and poor workmanship, and both were hopelessly over budget and behind schedule. Both have suffered innumerable problems with the operation of their new units.
Because there were not enough of them, the existing coal stations were run too hard, with not nearly sufficient maintenance, and are now falling to pieces, so that we are having increasing blackouts and decreasing plant availability. Expensive accidents are frequent, including the hydrogen explosion on the generator of Unit 4 of Medupi, during a simple and routine procedure.
The green threat
Then came new enemies of good electricity. Under President Zuma, the Gupta brothers (representing a kind of super-BEE), captured Eskom assets and senior appointments. From a completely different direction came the green threat. Solar and wind, which are wonderful for off-grid applications but useless for grid applications, were forced upon by green zealots.
Under the wretched Renewable Energy Independent Power Producers Procurement Program (REIPPPP), which began in 2013, Eskom was compelled by the ANC government to buy unreliable, intermittent solar and wind electricity at very high prices. This electricity almost never comes when it is most needed, and usually comes when it is not needed at all.
Eskom received compensation for the prices it had to pay for this awful stuff but not for the much more important system costs of converting unreliable to reliable electricity, which I estimate is at least 200 cents/kWh. (If a solar company says its price of electricity is 20 cents/kWh, the final cost to Eskom will be 220 cents/kWh.)
Under the Department of Energy, the Integrated Resources Plan (IRP) had legal weight. IRP2019 is a plan for new electricity supply until 2030. It is like a suicide note for our electricity supply. It embraces all the energy technologies, especially solar and wind, that have sent electricity prices soaring wherever they have been used for grid electricity, and electricity failures increasing.
Europe is in an energy crisis in large part because of the mounting costs and problems of solar and wind. Now that REIPPPP has proved an expensive failure, the ANC government, with the full approval of senior Eskom managers, such as its CEO, Andre de Ruyter, have decreed that we must have even more of it.
No doubt the rich renewable power companies from Germany and elsewhere are rubbing their hands with glee. Expect to see glossy advertisements and long articles in our mainstream media about the wonderful benefits of ‘renewable’ energy.
Our best new source of electricity is nuclear, which is safe, clean, reliable, sustainable and affordable. It so happens that it also emits no CO2 in operation, which I don’t see as an advantage but which the greens do.
However, the greens are against it anyway. Koeberg, our only nuclear station has been a great success, despite recent bumbling with the replacement of its steam generators. We need more nuclear, and as soon as possible, which unfortunately would only be about 2032.
In the ANC, the energy minister, Gwede Mantashe, does seem in favour of nuclear. I don’t know about the rest of the ANC. What do senior Eskom managers think of new nuclear? I don’t know but have little confidence in their opinion.
What about the other political parties? Could we expect a more logical energy policy if any of them came to power? The DA’s shadow minister of energy, Kevin Mileham, speaks the standard nonsense about solar and wind; he also just quotes their prices leaving the solar panels and wind turbines, not their final prices after system costs have been added.
However, I believe there are others in the DA with more sensible views on energy. In the parliamentary debate last week, the EFF’s Phiwaba Madokwe made some good remarks about the need to stop the corrupt coal contracts and about the disgraceful negligence leading to the Medupi generation explosion, but she then spoke racist nonsense about the need to fire de Ruyter for being an ‘incompetent old white male’.
She might not have noticed plenty of incompetent young black males in Eskom. I don’t know what thoughts, if any, the EFF has about energy sources. In fact, I don’t know of any political party in SA with sound energy policies. (Mind you, I don’t know of any in Britain either.)
Our short-term energy future looks bleak. We shall have load-shedding for at least another ten years, and it will cramp economic growth and any chances of reducing unemployment. All we can do in the meantime is try to get the existing stations in better repair and try to find temporary sources of reliable electricity, such as the much-maligned powerships. After ten years, will we do the right thing and go nuclear? I’ve no idea.
The views of the writer are not necessarily the views of the Daily Friend or the IRR