fbpx

Load Shedding: South Africa Wrestles With Energy Privatization

Load Shedding: South Africa Wrestles With Energy Privatization

South Africa’s national utility Eskom was forced to implement “stage 2 rotational load shedding” over the last few weekends to augment its lack of diesel fuel for reserve power. In fact, November was a rough month for South Africa’s traditional power industry trying to keep the lights on amidst announcements of more power outages eminent through 2015.

“Eskom is clearly in crisis. We are facing constant threats of load shedding and collapsing infrastructure at Eskom,” noted the Cape Town-based Democratic Alliance in a Nov. 25 press release. “Simultaneously, Eskom’s credit rating has been downgraded to junk status, making its debt servicing costs increasingly unaffordable and unsustainable.”

Eskom’s rolling blackouts, as well as struggles with unpaid power bills, has added to the renewed call for privatization of the national utility.

“That is very long standing. Africans for privatization of Eskom were even around when I was serving there from 1993 to 1996, and it was a lively issue,” John Campbell, a Senior Fellow for Africa Policy Studies at the New York-based Council on Foreign Relations told AFKInsider.

Campbell, who served as political counselor at the embassy in South Africa during the transition, was also U.S. ambassador to Nigeria from 2004 to 2007.

The latest up-rising against Eskom is coming at a time when major renewable energy players continue to flock to South Africa sector, establishing the country as an African hub for solar panel and wind turbine blade manufacturing as those same companies building up the region’s clean energy capacity.

Mounting Technical Issues

During the ongoing power shortages South Africa has been experiencing since 2008, Eskom continues to call on consumers to switch off air conditioners, pool pumps and other non-essential appliances throughout the day to limit the impact of load shedding, which are usually scheduled from 6 a.m. to 10 p.m.

And there are more to come.

At a Dec. 8 media briefing, Eskom CEO Tshediso Matona chances are good load shedding will take place on Dec. 11 and 12 due to an incident at the Majuba coal-fired power plant in Mpumalanga. Last month, many in the region were thrown into darkness after a coal silo at the 13 year-old plant collapsed Nov. 1.

Matona said the prognosis for January is the same as December, while February and March 2015 “are pretty concerning.” But the Minister of Public Enterprises, Lynne Brown, recently suggested ongoing load-shedding will likely happen through 2018, the estimated date the new Medupi and Kusile coal power plants will become fully operational – two years behind schedule.

About 92 percent of Eskom’s power is generated by coal-fired power stations, with the rest from nuclear and renewable energy.

Normally diesel power plants kick in for a few hours during peak electric demand times, but Eskom has been extending their hours, requiring using more diesel. The problem is Eskom failed to order extra diesel fuel.

For Eskom to maintain its aging power plants requires taking them off the grid for a time, resulting in more energy shortages and load shedding, while continuing to simply neglect them can lead to longer-term breakdowns and rolling blackouts. Of Eskom’s 27 power plants – which average over 30 years old, nearly a quarter are currently down for either planned and unplanned repairs.

Financial Woes

Eskom also continues to struggle with unpaid customer electric bills. In Soweto alone, the national utility is owed $327 million, with the rest of the country owing around $236 million. The utility also has an estimated $21-billion funding shortfall through March 2018.

When Eskom was incorporated in 2001, its current power plants were mostly paid for and Eskom had little debt. Since then Eskom’s current debt has skyrocketed. In late November amidst the start of the latest round of load shedding, Eskom released its interim financial report for the period ending Sept. 30 showing municipal debt had risen to about $350 million.

“In South Africa, there are a number of these parastatals that are kind of foundering – transportation, the South Africa Airways and Eskom as well,” Jennifer Cooke, director of the Center for Strategic and International Studies’ Africa program told AFKInsider, noting there’s also “a lot of leadership turnover.”

Though electricity prices are set by the National Energy Regulator of South Africa (Nersa), Eskom has been pushing for increased electric rates to help meet its financial woes, claiming it costs more to generate the energy than what it currently charges customers.

Energy regulator Nersa approved tariff hikes for the financial year 2015/2016, though granting only an 8 percent tariff hike while Eskon had requested 16 percent. The government has also pledged a cash injection of at least $1.7 billion.

“The bottom line is that the state cannot afford to fix Eskom, and Eskom cannot afford to fix itself. The only rational, affordable and sustainable response is to investigate the role private actors could play in stabilizing South Africa’s energy supply crisis,” the Democratic Alliance notes.

The Economic Freedom Fighters a leftist, “economic emancipation” group, released there own statement Dec 8, noting the “ANC government’s incompetence, lack of foresight and planning, its corruption and disrespect of accountability is the reason we are in this energy crisis.”

“The core belief of the ANC is that there is no crisis. It does not matter how many times power cuts are initiated and that they are to go on till 2016 or how much money Eskom requires, which the state does not have or that Medupi is in perpetual delay, for the ANC there is no crisis, only a good story to tell,” the group continues.

“And on top of that, unfortunately, there’s a fair amount of cronyism that goes on in the appointment of heads of those parastatals,” Cooke told AFKInsider. “So you don’t always get the best and the brightest and the most technocratic leading them.”