Business Maverick

Business Maverick Op-ed

ANC peddles old ideas to resolve Eskom’s long-standing problems

Electrical power lines hang from transmission pylons near to the Eskom Holdings SOC Ltd. Lethabo coal-fired power station in Vereeniging, South Africa, on August 7, 2019. According to Ward 10 Councillor Peter Verbeek (DA), who sits on the finance committee, Emfuleni Local Municipality owes R3.5-billion to Eskom. (Photo: Waldo Swiegers/Bloomberg via Getty Images)

The governing party believes that its long-stated resolution on introducing private equity partners and diversifying SA’s energy mix is the panacea to Eskom’s problems. 

The ANC has peddled old ideas to save Eskom and SA from unprecedented power cuts, saying it wants to introduce strategic equity partners in the debt-laden power utility and diversify the country’s energy mix to include renewable energy into the national grid. 

While the ANC believes that these interventions are a game-changer, the diversification of SA’s energy mix alone is part of the National Development Plan, a policy that was adopted by Parliament in 2012 but the governing party has failed to implement.  

Meanwhile, the introduction of equity partners at key state-owned enterprises (SOEs) is a long-standing ANC resolution that it adopted as early as 1992. But it’s revisiting the implementation of the resolution because many key state entities are in financial distress. 

Azar Jammine, the chief economist at Econometrix, said the repetition of old ideas by the ANC indicates that it’s bereft of ideas to yank SA from its economic morass. 

“The ANC still hasn’t done anything about strategic equity partners into SOEs or a diversified energy mix because the quality of leadership hasn’t been inspiring for many years. It is also a reflection of an ideological split. There are factions within the ANC that want market-orientated policies while others want socialist-orientated policies,” said Jammine. 

As the country buckles under crippling power cuts, which have the potential thwart the SA’s economy into a recession and cost it its remaining investment-grade status from Moody’s Investors Service, the ANC said it’s considering various models for the participation of private equity partners to recapitalise SOEs including Eskom.

The ANC was briefing journalists on Wednesday 11 December on the outcomes of its two-day-long National Executive Committee (NEC) meeting, which was held in Gauteng’s Ekurhuleni. 

Dakota Legoete, an ANC communications personnel, said the NEC – highest decision-making body of the party – discussed possible models for the participation of equity partners into SOEs including capital from private firms or collective investment schemes. Targeting collective investment schemes implies that the savings of ordinary South Africans through stokvels or pension savings – estimated to be worth more than R4-trillion – might be used to recapitalise SOEs in exchange for their shares. 

Although this is not a dead cert, it is the first time in many years that the ANC has approved equity partnership models.

“Cabinet will announce the way forward in terms of what model we will take into the future in relation to SOEs. The NEC discussed the possibility of getting equity partners that can help us to build, operate and transfer so that the assets (SOEs) can later — whether in the next 10, 15 or 20 years – remains with the government,” said Legoete. 

This means that the ANC is not ready to let go of SOEs and is against the P-word; privatisation. 

“If we were to get an equity partner, the government must remain the majority shareholder. We are not privatising state assets.  We are only bringing equity partners so we can bring in private capital, which can bring the necessary skills and ensure that there is stability on strategic SOEs.”

Eskom woes 

Eskom is in a dire financial position with insufficient revenue from electricity sales to service its R460-billion debt load and tariffs that do not allow it to recover all costs. 

On Monday 9 December, Eskom has moved to an unprecedented stage six load-shedding – cutting 6,000MW from its capacity –  as it grappled with technical problems at its Medupi power station, a plant that is serially late in terms of completion and has faced cost overruns.  In addition to blaming wet coal and technical problems at other coal-burning plants, President Cyril Ramaphosa said Eskom cannot rule out possible acts of sabotage that led to the blackouts.  He said the power utility will not implement load-shedding between 17 December and 13 January. 

The latest blackouts have demonstrated the urgency in diversifying SA’s energy mix to include renewable energy from independent power producers (IPPs). 

On Tuesday 10 December, mineral resources and energy minister Gwede Mantashe said he would take steps to develop more electricity-generation capacity including allowing IPPs to come on stream earlier and initiate a drive for the use of more liquified petroleum gas. But these are more medium-term solutions that might take up to 12 months to implement.  Mantashe didn’t mention any immediate interventions such as relaxing licensing requirements for small-scale renewable energy generating players. 

Asked if the ANC NEC resolved to fast-track the procurement of electricity from IPPs given the intensified Eskom crisis,  Legoete deferred the question to the power utility.

“What is important now is for the board of Eskom and the minister of public enterprises (Pravin Gordhan) to put IPPs into the grid. This is the right moment for IPPs to be in the grid because the infrastructure was developed (to integrate IPPs into the grid) and that infrastructure is ready,” he said. 

Fact check: Mantashe and not Gordhan has the power to solely procure more generation capacity from IPPs. 

Legoete continued: “Eskom is a public entity with its own board of directors. People who can appoint IPPs are based at Eskom. The board of Eskom is better placed to ask them when they are prepared to put IPPs on the national grid.” BM

 

 

 

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