By Staff Reporters
The energy crisis that has engulfed South Africa today has been in the making for many years.
Eskom analysts and management warned government about the state we are in as early as December 1998 about the current crisis. They were ignored. Analysts and leaders in Eskom shared a report with government predicted that Eskom would run out of electrical power reserves by 2007 unless action was taken to prevent it.
The 1998 report recommended restructuring Eskom into separate electricity generation and power transmission businesses to improve power supply and reliability. Despite the warnings of the 1998 report and requests by Eskom to be allowed to increase capacity, the national government took no action. In December 2007, former president Thabo Mbeki made his first “public apology” for the country’s power problems related to Eskom’s load shedding.
“Eskom was right and government was wrong,” Mbeki said, after indicating that government was asked earlier to invest more in electricity to keep-up with the country’s growth.
Seven years later, on 11 December 2014, former president Jacob Zuma assigned then deputy president Cyril Ramaphosa to oversee the turnaround of three state owned companies namely “Eskom, the South African Airways, and the South African Post Office”, all of which were in dire straits. State-owned enterprises play a significant role in the South African economy, but sadly many of them are failing entities – a glaring example of which is the South African post office (SAPO). This SOE is technically bankrupt due to debts in the billions and an ageing and inefficient infrastructure. It seems as though it is on the brink of collapse.
Another SOE in the same situation is the South African Airways (SAA). Sold recently, but its woes persists. The sale of SAA was announced in June last year after the airline emerged from lengthy bankruptcy proceedings, during which its planes were grounded for well over a year and the workforce cut by 80%. The airline, which used to serve destinations across Africa and a number of major global cities, hasn’t made money since 2011 and received state bailouts that totalled billions of rand.
The National Treasury said it was not consulted on the sale of the stake, which it said cost R51 ($3.16), and remains in the dark about a number of other agreements such as the buyer’s proposed issue of preference shares to the DPE. It’s also concerned that government guarantees on SAA’s debt remain in place. State defence manufacturer Denel is one of the SOEs faced with a bleak tomorrow despite regular government assistance to return to a financially stable position. Denel approached parliament to raise R800 million last year. Shortly after president Ramaphosa’s appointment to deal with these issues, it was clear that the path ahead was still dark. Despite many promises, lights were off again.
On 15 January 2015 Eskom’s then CEO Tshidiso Matona admitted that Eskom’s policy to “Keep the Lights on” meant that power station maintenance was neglected for years, and that South Africans will have to get used to electricity blackouts for the next four to five years. In December that year an agreement between Eskom and Areva to replace steam generators at the Koeberg nuclear plant was judged “unlawful”, by the Supreme Court of Appeal, bringing the utility company’s tender process into question. In late 2016, Stadard & Poor’s Global Ratings downgraded Eskom’s credit rating further into sub-investment cutting its long-term credit rating to BB – two levels below the investment threshold. In the same year Matshela Koko, former head of generation for Eskom, was named as acting CEO.
Eskom stated it intended to pursue a nuclear solution to current energy woes. According to projections from late 2016, the use of nuclear power would provide over 1000GW of power by 2050. In preparation, the company launched a training program for 100 technicians, engineers and artisans to certify them as nuclear operators. However, in 2019, under president Cyril Ramaphosa all nuclear plans were abandoned and the party was now pushing for renewables. This process has up till to date, fraught with procedural and planning inaptness.
In January 2018 Eskom’s acting Chief Financial Officer stated that the company could not afford a new build, following a 34% drop in interim profits due to declining sales and increasing financing costs. The government stated it would proceed with the plan but more slowly.
In 2018, the National Energy Regulator of South Africa (NERSA) denied an application by Eskom to increase electricity tariffs by a future 19.9% for the financial year 2018/19. The regulator instead granted a 5.2% increase and gave a list of reasons for the refusal to grant higher tariffs that the South African newspaper Business Day stated painted “a picture of inefficiency, inaccurate forecasting and cost overruns” at the power utility. Part of the refusal was the finding that Eskom had an additional 6,000 employees that were not needed, costing the company R3.8 billion annually.From economic meltdown to political crisis, from community protests to mass unemployment, threat of legal action and myriad of other discontents, Eskom, South Africa’s energy utility, has plunged the country into a state of national disaster.
An energy analyst has warned of an increasing risk of stage 8 load-shedding as Eskom scrambles to stabilise its coal-fired system and delayed the scheduled maintenance of a unit at its Koeberg nuclear plant.