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Mantashe suggests forming second state-owned power util...

Our Burning Planet

ESKOM 2.0? 

Mantashe suggests forming second state-owned power utility to solve energy crisis — Ramaphosa agrees

Department of Mineral Resources Minister Gwede Mantashe. (Photo: Freddy Mavunda / Business Day) / President Cyril Ramaphosa. (Photo: Sebabatso Mosamo / Sunday Times)

As the ANC-led government scrambles for solutions to the worsening, 14-year-old energy crisis they’ve markedly failed to arrest, Gwede Mantashe — Mineral Resources and Energy Minister and ANC National Chairperson — has suggested the answer lies in the creation of SOE public utility to compete with Eskom.

As businesses and households continue to be silenced and darkened by the imposition of rolling blackouts, those tasked with ensuring security of supply are scrambling for solutions for the 14-year-old — and ever-worsening — crisis successive ANC-led governments have manifestly failed to resolve. 

Most recently, Mineral Resources and Energy Minister and ANC National Chairperson, Gwede Mantashe, has suggested setting up another state-owned electricity public utility to compete with Eskom — something which ANC President Cyril Ramaphosa has said he agrees with. 

Addressing the South African Communist Party (SACP) conference in his capacity as ANC president on Friday, Ramaphosa sought to reaffirm the role of the state in the development of the country.

“We should not diminish the central role of the state in coordinating, in planning, in guiding, in enabling the development of the economy. And yes, in setting up companies — state-owned enterprises — through which it will foster the employment of our people. That is what we would want to see the state doing,” he said.  

“We need, therefore, comrades, a strong, capable, developmental state with a public sector that has a dynamic and agile private sector that work together and complement each other. If the state is to effectively support growth and development as envisaged in ‘ready to govern’ then it needs to have sufficient capital, skills and must highlight the use of technology as one of the key enablers in modern times. It needs to be efficient, it also needs to be innovative but it also needs to be competitive even if we will have state entities competing against each other.

“For instance”, Ramaphosa continued, “Comrade Gwede Mantashe, in dealing with this problem of energy, has said ‘President, why don’t we set up…another state-owned entity so that we lessen our risk just as they are exposed in one entity,’ and I’ve said I agree with him because the state must continue to play a key role.”

He continued, “our national utility has not only been in a state of distress…for easily 15 years but it has been operating according to a model that is no longer suited to the technology or economic conditions of the present.” 

Explaining that Eskom being the sole electricity utility in South Africa was a grave strategic risk, as failure threatened a “spectacular calamity”, Ramaphosa went on to make comparisons with the Chinese approach.

“If we look at other countries like China, for instance, it has a number of state-owned electricity-generating companies that even compete amongst themselves. Compete amongst themselves to even bring prices down. And that is a future that I think we should begin to imagine that yes — we should reduce the risk that the country could be exposed to like right now we are exposed to a monumental risk because the one company that has been generating electricity for 100 years with power stations that are more than 50 years [old]…and that in part is part of the weakness and risk.

“We are today witnessing, the great risks associated with placing sole responsibility for electricity generation in one company and that is why when comrade Gwede flighted the idea of saying ‘why not a second one [power utility] which can be owned by the government’ and I said ‘I think that’s not a bad idea.’”

The revelation comes a few days after Ramaphosa, in his capacity as President of the Republic of South Africa, said at the tail end of his weekly newsletter that he has over the past two weeks “been working with the relevant ministers and senior officials on a range of additional measures to accelerate all efforts to increase our electricity supply. The message is clear: this is no time for business as usual. We need to act boldly to make load shedding a thing of the past.”

He continued, “We will soon be completing the detailed work and consultations needed to finalise these further measures. We will then, in the coming days, be able to announce a comprehensive set of actions to achieve much faster progress in tackling load shedding,” adding that “there are no easy solutions to our electricity crisis but we are committed and determined to explore every avenue and use every opportunity to ensure that we generate enough electricity to meet the country’s needs.”

What these measures and set of actions might be is unknown at this stage but there are some indications as to what they might include. 

When asked by Our Burning Planet on his thoughts about the proposal on Friday, Chris Yelland, energy analyst and Managing Director at EE Business Intelligence, with a chuckle said “this cannot be considered a solution to the load shedding of today,” adding that the idea of establishing a state-owned company to resolve the issues created by another failing state-owned company seemed foolhardy. “I just don’t get it.”

Earlier in the week Gaylor Montmasson-Clair, a political scientist and Senior Economist at Trade & Industrial Policy Strategies (Tips) — an independent, non-profit, economic research institution — shared some of his ideas for how South Africa might more rapidly resolve the power crisis with Our Burning Planet.

Montmasson-Clair posited that an avenue to rapidly bring additional electricity generation capacity in South Africa would be to further enable the development of distributed generation.  

State-owned enterprise: An image of plumes rising from a coal power station.
Mineral Resources and Energy Minister and ANC National Chairperson Gwede Mantashe has said another state-owned enterprise electricity producer could be the answer to South Africa’s energy crisis. (Photo: Unsplash / Maxim Tolchinskiy)

He noted that “Since 12 August 2021, the licensing exemption threshold has been increased to 100MW. Projects under 100MW are exempted from licensing but must be registered with the regulator. Projects larger than 100 MW remain out of this dispensation and must be enshrined in the IRP or obtain a ministerial deviation,” and suggested that “the application and definition of the 100MW licensing threshold should be revised.”

Official stance

Our Burning Planet, accordingly, sought to get the official position on these recommendations by the delegated authorities.

In a webinar on Thursday held by the Presidential Climate Commission (PCC) in conjunction with officials from the Department of Mineral Resources and Energy (DMRE) as well as the Council for Scientific and Industrial Research (CSIR), some descriptions of what measures and actions the President could and might take to ameliorate the impact of Eskom’s capacity shortfall were laid out.

When asked by this reporter in the webinar about the 100MW threshold and whether it posed an impediment to more rapidly dealing with the current power crisis, Crispian Olver, the PCC’s Executive Director responsible for running the Secretariat of the PCC and its various policy and research programmes, responded that “The National Planning Commission [NPC] has recommended that the 100MW be done away with completely. This may well form part of the package of measures that the President is going to announce.”

Business Maverick has previously reported that the NPC — chaired by Minister in the Presidency Mondli Gungubele — put forth a number of proposals including, but not limited to, removing the 100MW ceiling “because Eskom’s grid code and grid connection authorisation process is sufficient to regulate this growing market.”

Another one of the measures government has tried to implement to arrest the worsening crisis they’ve overseen for more than a decade was announced by Ramaphosa when in 2020 he announced an Amendment to the Electricity Regulation Act 4 of 2006 (ERA) allowing municipalities in good financial standing to procure their own power.

However, Montmasson-Clair explained to Our Burning Planet, “the process is stalled due to some legal confusion on the need for municipalities to apply for a ministerial approval.”

When asked in the webinar about this, Olver said that “The National Planning Commission and the AMEU [Association of Municipal Electricity Utilities] have both proposed a substantial relaxation of the regulations holding back municipal self-generation, including removing the requirements for a Ministerial determination.”

Speaking to the crisis and the need to shake off the lethargy that has plagued the DMRE, Jacob Mbele — the recently appointed Director General in the department — in Thursday’s webinar said, “It is common knowledge that the power system is currently constrained and Eskom has indicated that the outlook is unlikely to improve in the near future.

“This is also confirmed in the medium-term system outlook that was published by Eskom and Nersa last year, which indicated the system will likely remain constrained for a period longer than it was envisaged in the IRP 2019.”  

Mbele continued that “we understand and we all know the main drivers of these constraints to be obviously the lower energy [availability] factor of existing…coal feed plants and the delays with the interventions that had been…undertaken to date to bring additional capacity on the grid. I am aware that there is a general view out there that the 2019 IRP is outdated and before I provide progress, I want to put a counter view and argue that it is actually not outdated, it is still relevant.”

The Integrated Resources Plan (IRP 2019) is South Africa’s energy blueprint. The DMRE has faced criticism for not updating the IRP sooner, as the introduction to the 2010 IRP (the last one to come out before the 2019 IRP), states:

“The Integrated Resource Plan (IRP) is a living plan that is expected to be continuously revised and updated as necessitated by changing circumstances. At the very least, it is expected that the IRP should be revised by the Department of Energy (DoE) every two years, resulting in a revision in 2012.”

The updated IRP is expected to be released for public comment in 2023.   

Mbele, in the webinar, continued to defend the IRP 2019 saying that “The challenge with the IRP 2019 is that it does not make sufficient provision for additional capacity because of the assumptions that we had made. But it does not make the proposals of the energy mix in the IRP irrelevant.

“We are proceeding with the implementation and rollout of the rest of the capacity seen in IRP 2019…What is there is not irrelevant. We just need more of it,” he said. 

Eskom, which has been forced to implement rolling blackouts, previously told Our Burning Planet that, “The two primary reasons for load shedding are the unreliability and unpredictability of Eskom’s generation fleet, resulting in low availability as measured by the energy availability factor (EAF), and a lack of generation capacity in the country.

“To stop, or significantly reduce load shedding requires both of these issues to be addressed — critically the addition of 4,000MW — 6 000MW of new generation capacity to the national grid.

“The Department of Mineral Resources and Energy is responsible for procuring additional capacity, which will both provide direct capacity to reduce load shedding but also provide Eskom with the capacity or “space” in which to perform the deep, reliability maintenance that is essential for improving the reliability and predictability of the generation fleet.”  OBP/DM 

 

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Absa OBP

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All Comments 57

  • Another SOE in the energy sector will not result in competition, and would be an absolute disaster! It will likely make the crisis worse, with another mismanaged and money draining entity! What is needed is private corporate competition and possibly a public private partnership with Eskom.

    • Absolutely! The anc state means massive corruption and mismanagement! If attempted, this will take us back into the Dark Ages!

  • But the inefficiencies of SOE’s are exactly because they are state owned…

    The last remaining respect I had for Ramaphosa is now gone. Is he seriously deluded enough to think that creating a second feeding trough to solve the problems created by the first feeding trough is going to fix things? What a joke! Classic communist cognitive dissonance. I hope he ends up in orange overalls some day sitting next to Zuma pondering how it all went wrong.

  • I am left speechless by Mr Mantashe’s proposal to set up a competing energy SOE, but not wordless. The DMRE has been responsible for all the delays in updating the IRP and for withholding new capacity determinations. Surely this indicates that either the DMRE is not able to do its job or that they have some other agenda, such as promoting nuclear or gas power or the mythical “clean coal” solution. To reduce our energy risk we need less centralisation, more completion, less regulation and more innovation. What we don’t need is another politically controlled Eskom. What on earth is our President thinking of? That more if the same will solve our energy problems?

  • Another opportunity for cadre deployment. Another disastrous SOE. Do we really need this? The private sector is much more agile. The private sector is much better placed to attract the necessary investment. The private has certainly engaged in anti-competitive practices in the past, but given the right environment it is much better placed to drive prices down by competition in the market. Ramaphosa is right when he says South Africa needs a strong developmental state. But he completely misunderstands what that means. That means a strongly positive business environment. It means good regulations, applied with integrity across labour relations, environmental protection, education and skills development. It means all those things the ANC has shown themselves incapable of doing since the Zuma era. A strong developmental state does not mean more failing SOEs.

  • The ANC tried this with airlines – ended with with 3 of them – and not one is operating today! Should be lesson learned, but what the hell, stupidity is doing the same thing again and expecting a different outcome!

  • Ramaphosa is not only lacking backbone, he is also incapable of learning. 1) He does not realise that Mantashe is useless. 2) Most if not all SOEs have failed. 3) ESKOM is such a disaster that no sane person will believe that another SOE for electricity production will not fail again.

  • Are they out of their minds! The State can not run even one electricity company. How about inviting the private sector to compete with Eskom if the ANC wants competition?
    As an aside, Ramaphosa should have told “the comrades” to wake up, it is 2022 not 1922.

  • What! That’s such a terrible idea that only Gwede could have thought of it ! The the trough is empty, so roll on state capture version 2! No, no, no!!!

    This statement from the article says it all “ we are exposed to a monumental risk because the one company that has been generating electricity for 100 years with power stations that are more than 50 years [old]”… more like the monumental risk is due to the one party ANC that has been governing for 30 years with people well over 50 years old and tied up in old ideologies is the cause of the risk!

  • “We should not diminish the central role of the state in coordinating, in planning, in guiding, in enabling the development of the economy. And yes, in setting up companies — state-owned enterprises — through which it will foster the employment of our people. That is what we would want to see the state doing,” The government has spectacularly failed in doing just that. In fact, it has lately been moving in the direction of increased private sector involvement. However, we must remember who the audience is. I believe we are at least in the second year of just the Eskom split into generation, transmission and distribution. How long will it take to create and resource a new public entity? This is smoke and mirrors, to deflect attention from Mantashe’s politicking inertia. (China is a vast country, and I expect that various companies operate on a regional basis, and not primarily to compete.) When can we have generation capacity already?

  • A 2nd large energy parastatal is the last thing we need…the state can’t run anything efficiently…and definitely not in South Africa based on the state of all SOE…unless this is a very cynical move to provide yet another source to plunder

  • So familiar. Just another Cadre stuffed criminal organization burning tax payers money. They just cannot let go of the gravy train and allow private enterprise to solve the problem.

  • “We should not diminish the central role of the state in coordinating, in planning, in guiding, in enabling the development of the economy. And yes, in setting up companies — state-owned enterprises — through which it will foster the employment of our people. That is what we would want to see the state doing,”

    Tye ANC has failed over the past 27 years, why should they suddenly succeed now?! Communism has failed world-wide. Accept it.

  • I get it Mr Yelland. Gwede was mumbling as always and Cyril’s mind is full of Phala Phala, so he is not comprehending anymore.

  • I know one of the things that should be done ASAP to bring a start to the solution of the Eskom problems. This is not the full solution, but it is clear to me that it is necessary to get the things done that needs to be done: Bring the departments of Energy and Public Enterprises under one minister so that this continuous passing of the responsibility to someone else can stop and Ramaphosa and the public has ONE person, and only ONE, to hold to account for any failure in this regard. Pres. Ramaphosa, I hope either you, or someone else in the Presidency that has enough clout to give effect to this, are reading this . . .

  • With what Ramaphosa apparently said, I “smell” the influence of the ANC very clearly. Because Ramaphosa clearly understands that jobs are created by the private sector; he said as much in his budget speech. If he now all of a sudden wants the public sector to do that, it can only be because he feels forced to say it. The only way to create proper competition is to let the market decide; as long as it is SOE’s that are involved, it is not the market but the government that decides. And yes, we can learn from China; their huge economic growth and development since the 1980’s came about, not because they are using SOE’s, but because they came to the point where they allowed free enterprise as part of Chinese capitalism that followed on Deng Xiao Ping allowing private property. THAT is why China developed so fast, not because of SOE’s! I mean, if an industry does not exist, a government can start an SOE on a temporary basis to get the industry to develop; after that, it needs to privatised in order to compete on the open market, and to allow free enterprise to find new, more innovative and productive ways to run the industry. It should have happened with Eskom 25 years ago already, then we would not have had this problem. The only justifiable role of Eskom as a government-controlled body is to run the grid, to control the technical standards so the electric & electronic equipment of the public is protected. Distribution & generation should be dominated by the private sector.

  • Do these communist aligned ANC top of the pyramid “leaders” take us for fools?
    They cannot keep their gobbling snouts out of the SOE feeding troughs, and now they want us to accept another state owned and controlled electricity supplier.

  • There’s a piece of the puzzle that seems to be missing and that’s on the consumption side. Reading articles of consumption management overseas where people are forced to think about and actively manage consumption and taking lessons learned and applied personally and amongst family et al, we as South Africans could do with some sensitising both as private citizens, businesses and government to better manage power consumption; and it’s not that difficult once you are sensitised to how you are consuming. Rider; having a relatively small setup (PV, inverter & battery) has taught us how to manage usage and stop wasting energy.
    Having also some insight into some households’ usage, I am somewhat aghast that some households are not phased at using many 10’s of kWh per 24 hour period, some into 100’s. Yes we all need power; do we need all the power all the time…?
    You only have to look at empty buildings with lights burning at night, excessive use of aircons etc etc. This is akin to wanton water wastage through leaking taps and broken infrastructure.
    Rather than sitting on our hands and grumbling about load shedding, a look into each of our consumption habits could help alleviate at least a part of the problem.
    Some sensitising in this regard may be well placed to reduce energy consumption and the associated cost.

  • I loved the description of Chris Yelland’s reply to the questions posed by DM, “with a chuckle said “this cannot be considered a solution to the load shedding of today,” adding that the idea of establishing a state-owned company to resolve the issues created by another failing state-owned company seemed foolhardy. “I just don’t get it.”
    I dont see that any further comment from me would surpass this. Well said Mr Yelland.

  • This pair are locked into dark age thinking. A “competitive” SOE is not only a contradiction in terms, it is like launching another Ark to save the planet from destruction.

    SA needs fast effective privatised solar and wind farms – and it needed them yesterday.

  • Had to check it wasn’t April First. The fact that Gwede is setting the direction is the first problem. Mr Ramaphosa has shown his hand. State led development…. On current firm that is a very low road for South Africa

  • Genius idea! Lets delay for another 15 years while we build ourselves another useless, incompetent, state-owned utility. It won’t solve the power problem. But it might help the ANC cling to power for a while longer.

  • Why is the ANC yoked to the communist party at all? They can’t be part of the famed democratic revolution surely because no one much votes for them. They just represent themselves. An ideology that failed everywhere. 2 SOEs is great for the looters but another albatross for the country.

  • Enter Stage Left: Patrice Motsepe with his power generation facility. We are now going to be fully captured, worse than we are now. We are now living in George Orwell’s book.

  • Beyond Parody
    We screwed up one of them, it is bankrupt and can not invest Capital due to our corruption and incompetence.
    I know, lets build a new one.
    Think of all the Cadre deployment , contract opportunities, Oink, Oink.
    Fortunately I do not think this will get past the, I have an idea that the Comrades may like stage.

  • First they said the problem was we needed to break Eskom up into three parts. Now they say sorry we meant let us create a secondary Eskom. The sender is there, remove the 100MW private generation cap, allow private business to enter the energy market since you already say you want competition (although it is from yourselves). If socialist ideals are so much better, let it then prove itself by competing against capitalist driven companies.

  • I’m kinda wondering if a second Eskom is really such a bad idea – start small, but afresh, with people who have the know-how, rather than trying to scoop the sediment from a rotten barrel?

    • Aha, but the acronym SOE hides the killer words for the phrase “people who have the know-how” – State Owned. After 30 years of corruption, incompetence and trough-dining, how will the State be able to find a competent person with the know-how? Certainly not by looking up towards Gwede or to the people sitting on their left or on their right?

      More seriously, there have been articles on this platform and others that analyse why ANY SOE is doomed to failure – they serve political mandates, not economic ones, and are therefore not driven primarily by service delivery and efficiency.

  • Comparing us to china? …… Chinese homeowners across 22 cities refuse to pay mortgages this will result in 83 billion dollars of bad debt. China construction bank postal bank ICBC may be more exposed. This is posing a threat to social stability. Chinese banks already grappling with challenges from liquidity stress. Starting another state owned energy utility is tantamount to theft and is equivalent to the unscrupulous business men in the private sector who open companies just to drain the resources …liquidating and leaving investors or creditors holding the debt. Then move on to open another company and do the same. This is EXACTLY what is being proposed another state owned thievery. The trough are empty what a disgraceful bunch you are. I pray God bind their minds their tongues their ears and their minds and spare our people from any evil plans that is done in secret places.

  • The anc received a fully operational Eskom when they started ruling the country. All they had to do was to maintain it and progressively expand the capacity to supply more paying users with cheap electricity. And what happened? Exactly what happened to almost every working entity that was built up prior to 1994 – it went to ruins and corruption and blatant theft decimated the economy and the country as a whole. Now they believe they can do something different to what their corrupt DNA dictates?! Tell me another one … this is just another attempt at creating a fresh feeding trough for deployees.

  • use the sun ANC. IPP’s are the way to go. and they must be run by private companies as is in Independent certainly not government.

  • It is obvious from these ridiculous machinations that China is already part of the plan. With that come the bribes, economic colonisation by the country with the least human rights in the world.
    To think this could be a solution is one thing, but then to tell people that you think so is just really embarrassing!
    They are hilarious! I can just imagine sitting in on one of their conversations – a laugh a minute!
    But the for someone who keeps his money in his couch, I suppose, this also seems like a good idea.

  • A Luta Continua !! so the 3-pronged split of Eskom into Generation, Distribution and Corruption (sorry, Maintenance) with Patrice getting involved, appears to be back on track. Gwede lost out on the Turkey gas wealth creation for generations of his, and has now convinced CR that he should share in the new SOE development – Phala-Phala has cost a bit more !! This corruption will never stop.

  • A second Eskom. Completely pointless to have two sets of cadres comrades competing about who can steal or break more things faster. There is one solution: Put Eskom Transmission under Public Enterprises, not under Eskom Board. Make Eskom Transmission the central buyer and seller and grid operator. It must also operate the exiting and new pumped storage systems and decide loadshredding. Put the geographically sensible Eskom Distribution bits with the metros and councils that border it, leave one rural Distribution company as subsidiary of Transmission, not Eskom. What we know as Eskom is only Generation. Private sector and Generation supply energy to Transmission.

  • Popcorn thinking! So let’s float it, carry out a feasibility study and consider findings and recommendations then take the idea to the People! Can’t believe that these two actually did any manual work in a mine…

  • What are they smoking? They cannot get good engineering staff for one company. Where does he think he is going to get for another? They should sell existing power stations off to international experts who will bring in expertise and will be able to do the maintenance without the problems Eskom has. They will also be less vulnerable to strikes. Leave Eskom to do the distribution. Use energy bidding to set prices. Use money from the sale of generation capacity to improve the distribution network to accommodate renewables from around the country.

  • We do not have a single successful SOE. How will the addition of another bucket of incompetence, inefficiency and corruption, solve the problem? It’s just heartbreaking that this level of fantasy is even thought of, let alone suggested by a minister.

  • Anything that contains ‘Comrade’ is going to hit the ground hard with no parachute, like all the rest.
    Personally I am planning to lay low to avoid the splatter.
    It is so little and so, so too late.
    Take cover ANC, the sky is falling.

  • Occam’s razor: there is a much simpler explanation. Corruption and crooked deployments at Escom has become too difficult. ANC is running out of funds. Brainwave: let’s start our own power company! We’ve lots of cadres with a proven track record in kickbacks rejected from Escom, this is the ideal solution to all our (important) problems.

  • CR is just messing with the Communists. To build a fully functional station will take up to seven years. So it means ANC will take 5yrs of debate, 5yrs passing it through the state and another 15yrs of build. Everybody in that audience would be very old or dead already. Clever fox you Cyril you

  • So they can loot that one too! No thanks. ANC have no business running anything. What have they run successfully in the last 20 years?

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