I recently listened to a podcast by economist and journalist Tim Harford that discussed how a captain’s inability to consider changing the direction of his ship resulted in the destruction of the 300m oil tanker, the Torey Canyon.
The narrator labelled the problem as ‘plan continuation bias’. This is defined as an unconscious cognitive bias to continue with the original plan in spite of changing conditions. In other words, people have a tendency to persist with a course of action that is no longer viable. In the Torey Canyon’s case, the captain persisted in following a route that resulted in his ship running on to the rocks.
South Africa’s Minister of Minerals and Energy, Gwede Mantashe, seems to have a severe case of plan continuation bias when it comes to energy supply. Any doubts that Eskom had severe operational challenges were banished during Phakamani Hadebe’s time as CEO of Eskom.
Hadebe arrived intending to financially stabilise Eskom. Instead, he found himself dealing with a massive maintenance backlog that has resulted in an increasingly unreliable fleet, the diversion of coal and maintenance contracts into expensive and unreliable suppliers and vastly expensive new power stations that had been poorly designed and built and had no hope of delivering their nameplate capacity to the grid.
While Mantashe has repeatedly declared support for private participation in electricity generation since December, he has yet to do anything to facilitate this. Instead of easing the constraints to private sector generation, he has persisted with the old plan that keeps South Africa dependent on Eskom supply.
Consequently, South Africa has a dirty, unstable, unpredictable, polluting fleet that provides so little security of electricity supply that no one can make any investment that relies on electricity. The result? Overall private sector investment remains tepid. The electricity constraint has become a major problem for growth. Eskom’s decline is the original sin, but the solution is the introduction of private-sector generation. This could spur an investment boom in South Africa.
In the meantime, his inertia is having profound effects on the economy. Every month that he delays the re-opening of the REIPP for bid window 5, means another month of load shedding.
Minister Mantashe’s boss, President Cyril Ramaphosa, and the ANC as an organisation, have also made statements supporting private sector power generation. The last ANC NEC statement supported these principles. As did Cyril Ramaphosa’s State of the Nation Address.
With help from electricity expert Professor Anton Eberhard I’ve made a list of moves that would result in a tangible improvement in electricity generation in South Africa in a relatively short period:
None of these suggestions is surprising. None of it is difficult to implement. Some of it can be done through ministerial amendments to Schedule 2 of the Electricity Regulation Act. The minister can also issue a Section 34 determination authorising the IPP Office to proceed with new power procurements.
Demonstrating tangible progress on economic reform while simultaneously securing South Africa’s energy supply is one half of what is needed for Moody’s not to downgrade South Africa’s debt rating in its March 2020 assessment. (The other is progress on public sector wages in Finance Minister Tito Mboweni’s Budget next week.)
Most do not expect Mboweni to deliver on his half of the requirement. If he somehow positively surprises the market and takes the steps necessary, and Mantashe makes progress with two or three of the items I’ve listed, that would surely keep Moody’s at bay. More importantly, it would spur growth and create jobs – something South Africa desperately needs. It is very worrying that Mantashe’s plan continuation bias seems to blind him to this simple reality. BM
A medium popcorn & soft drink combo is the nutritional equivalent of three quarter-pounders and 12 pieces of butter.