South Africa

The Medupi delay: Why you should care

By Khadija Patel 9 July 2013

On Monday Eskom announced, as many had already predicted, that the Medupi Power Station would not be operational at the end of this year. There is, however, much more at stake than concerns that the delay may bring load shedding to your home or business. By KHADIJA PATEL.

The 4764 MW coal-fired power station currently under construction near Lephahlale in the Limpopo province is named Medupi, in the hope that the project will live up to its name: the ‘‘rain that soaks parched lands, giving prosperity”. There certainly is no faulting the intentions of Medupi, to bridge the shortfall of the power shortage in South Africa. But it’s come at great cost. A $3.75 billion loan from the World Bank to fund the project is the first foreign debt South Africa has incurred since the end of Apartheid.

The project has been mired in controversy. Labour unrest, bureaucratic bungling, environmental concerns and spiralling costs have led some to wonder whether that rain will ever actually bring prosperity to these parched lands.

State-owned power utility Eskom’s build programme initiated in 2005 is meant to deliver the new electricity infrastructure which South Africa needs to support economic growth and development. The Medupi project represents Eskom’s largest single investment in its 84-year history. Again, the intention can hardly be faulted. By its own admission, Eskom says, “The build programme has faced challenges since inception.” The organisation has, however, added that “significant progress has been made”.

That progress has been blighted by confirmation from Eskom on Monday that Medupi would not be operational later this year after all.

“A more realistic target for the first synchronisation of Unit 6 to the grid is the second half of 2014,” Eskom said in a statement on Monday.

Unit 6 was meant to deliver Medupi’s first burst of power to the South African grid by the end of 2013. The delay now means Eskom will have to search for innovative solutions to make up for the 700 MW Medupi was scheduled to provide.

While there has been no indication just yet that the delay will culminate in load shedding, the delay does come at a significant material cost as well.

The cost of the project is set to increase from R91.2 billion to R105 billion. This is certainly no small change. And questions have already been asked about who exactly will be made to pay up. Consumers can rest easy, though: Eskom will be claiming penalties from the contractors who have failed to deliver timeously.

In April, after inspecting the Medupi site with senior Eskom officials, Public Enterprises Minister Malusi Gigaba warned that he would also take action against those responsible for the delay. “Necessary penalties will be at hand should any delays be experienced. Heads will roll,” he said.

“The Minister must now act on his word and make sure some heads roll and face the consequences of poor management at the project,” Natasha Michael, the DA’s Shadow Minister of Public Enterprises, said on Monday. “This is the third time that deadline at the project has been extended. The date for commissioning the first Medupi unit was initially scheduled for the end of 2012 and then revised to May 2013, to the end of 2013 and now to mid-2014.”

Gigaba’s warning, and indeed the measures taken on the site to meet the deadline, like longer working hours, have failed to improve the time management of the project. The Medupi project remains mired in mistrust, suspicion and contention.

Melita Steele, a climate and energy campaigner for Greenpeace Africa, believes that Eskom’s preference for a coal-fired plant at Medupi and Kuslile – the state’s other big money coal project currently under construction – not only threatens people’s health and the country’s water supplies, but also fails to solve the country’s electricity crisis.

“Both Medupi and Kusile have been consistently plagued by problems, delays and cost-overruns,” she says. “In this case, the planned coal-fired power stations are failing to deliver safe, affordable electricity on time.”

It is the placement of Medupi within the country’s infrastructure development programme that is also significant.

Eskom describes its infrastructure investment programme as “unparalleled in South Africa”. It claims the programme “has yielded tangible benefits in terms of job creation, skills development and the development of local supplier industries”.

“In line with government policy, we are not just investing in the physical infrastructure which South Africa needs to enable higher rates of economic growth, but we are also building a legacy of skills and industrial development for the country,” Eskom Chief Executive Brian Dames said.

According to the power utility, “There are now 35,759 individuals working on new build project sites, of whom 16,100 are employed from the local districts. Since the inception of the build programme, 6,851 individuals have completed their skills development training and 2,763 are currently in training.”

The focus on infrastructure development is not unique to South Africa. In many ways, infrastructure development is Africa’s newest cash cow. For those willing to part with their cash, there certainly is a lot of money to be made – ask the contractors at the centre of the Medupi mess. Infrastructure investment is badly needed, especially in sectors like energy, where the shortfall cripples development. Medupi and its many, many problems, however, ought to be a lesson in how investment in infrastructure development progresses from this point.

At the heart of the Medupi project is a strong mistrust in government’s belief that such a large, coal-fired plant is actually the best thing for the country. Even now, years into construction, and hopefully, one year before coming online, there remains suspicion that the entire project is the product of a cleverly concocted scheme set to profit a select few while the rest of the country spends years paying the debt incurred.

The success of Eskom in Medupi rests on them assuring the South African public that the plant will generate 10% of the country’s electricity once complete and not much else. Instead, there has been violent labour unrest, litigation between contractors, spying on stakeholders and challenges with the actual construction of the plant. Any project on this scale is bound to run into some challenges, but the number of problems accumulated on the Medupi construction site is certainly a test of the integrity of the state’s infrastructure development programme. What exactly does it all stand for? DM

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Photo: Workers walk past the construction site of Medupi power station in Lephalele April 11, 2013. (REUTERS)

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