FINANCIAL TIMES AFRICA SUMMIT
‘Electricity is a public good,’ says Minister Gordhan, defending state ownership of Eskom
Eskom is necessary because providing electricity is a public good and the state should be involved in the provision of public goods, says Public Enterprises Minister Pravin Gordhan.
Public Enterprises Minister Pravin Gordhan was asked at the Financial Times Africa Summit on Tuesday why South Africa needed Eskom at all. A member of the audience put it to him that South Africa had been ahead of the curve in 1993 and 1994 in licensing mobile telephone companies and that had changed the country’s telecoms landscape.
“Given that history of trailblazing, why do you need Eskom?” was the question for Gordhan, who was participating in the London summit remotely.
“We consider electricity to be a public good,” he said. “And I think there is a reason for the state to be involved in the provision of public goods — although there are many different kinds of innovations and mechanisms which would allow for partnerships with the private sector.”
Gordhan suggested that placing the provision of electricity into private hands in other parts of the world had not worked out well, including because it had increased prices. One of those places was Britain, he said, noting that by 31 October Britons would hear whether they would be receiving some sort of assistance towards paying their energy bills.
“There are other examples in the United States where some of the issues have relevance as well,” Gordhan added.
He said there was a need for public goods and for the public sector to play an important part in the provision of those goods, but not necessarily the only part. He noted that the private sector in South Africa was spending “huge amounts of money” to provide electricity for public use through Eskom’s transmission network, but also for its own use in mining and other sectors.
But, Gordhan asked, when the private sector came in to finance the provision of energy, “what will be the terms on which they will come in?” And could the private sector hold a country and its population hostage if it has an unregulated environment in which to operate?
He said the multilateral financial institutions had to play an important part in financing African energy provision. Partnerships between the public and private sectors were also needed.
“But in a way in which what is happening in some countries in the north doesn’t happen here eventually on the African continent as well; which is that renewable energy which came in fairly cheap — and that was its selling point — now the prices are being increased to match market prices for other forms of energy.
“And that’s a risk the world needs to look at, let alone ourselves. The last point is that Africa and many other developing countries across the world have had this dubious honour of having promises made but promises not delivered upon. In many ways, I would refer to this as the Covid-19 vaccine phenomenon — ‘We look after our own first and the rest of you can wait until we’re finished.’”
Gordhan was asked whether he believed that South Africa’s international partners who have pledged $8.5-billion to help finance its Just Energy Transition Partnership (JETP) — the European Union, US, UK, France and Germany — would not deliver what they had promised.
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“Well, you know, there’s been talks going on for some time,” Gordhan said. “I think some countries must be lauded for their very constructive approach and their readiness to put their money on the table, so to speak.
“And others are, regrettably, still in the narrative stage and the banknotes are still to be seen, to put it euphemistically. In the wider scheme, $8.5-billion … is a very small drop in the ocean compared to what each country is going to require, but more importantly, what the continent is going to require.”
Gordhan was asked about the role of coal in South Africa’s transition to renewables. Would South Africa still be producing coal even after it had decarbonised, even after the domestic power stations had been closed?
He replied that coal’s long-term future was “a declining future. But it’s not a disappearing future, tomorrow morning, so to speak. And I think the war in Ukraine and its ripples across Europe is a very timeous reminder that there are going to be shocks in the global system, whether it’s energy-related or the economy.” These were having a serious spillover impact on developing countries.
He noted that South Africa’s Integrated Resource Plan for energy, which was developed in 2019, contained a mix of renewables, hydro, nuclear and gas.
“And there’s coal, because we’ve just built two huge new power stations that between them give us something like 7,200MW optimally and those are going to be around for the next 30 to 40 years.
“So they will be an important component until we get our baseload right; until we get batteries that are going to be cheap enough to install not only in our country but elsewhere in the world and on the continent as well.
“And battery technology is also evolving … but it’s still costly at this point in time. There are projects in SA currently through Eskom where there are up to about 300MW of battery installations that are currently in development.”
Gordhan said the war in Ukraine had led to European countries that had shut down coal-fired power stations being forced to reopen some of them
“Gas is seen as the step down from both coal and other forms of fossil fuel. And is likely to play an important role in the next decade or so as well. To give us, if you like, a soft landing.”
Gordhan noted that South Africa’s just energy transition planning had begun before it signed the JETP at COP26 in Glasgow last year. Because electricity production contributes 41% of the country’s total carbon emission, the focus in the just energy transition had been on how to move away from Eskom’s coal fleet, which provides 80% of South Africa’s electricity.
Eskom had created its own just energy transition path, which included repurposing coal-fired power stations, retraining workers and interacting with coal communities on how to ameliorate the impact on them of shutting down coal-fired plants. The Komati Power Station in Mpumalanga was the pilot for this programme.
Gordhan said the priorities in how to spend the $8.5-billion of the JETP were Eskom’s just energy transition, helping the car industry move towards electric vehicles, and helping South Africa to become a powerhouse in renewable energy production. DM