South Africa is facing critical social and environmental challenges. Corruption, unemployment, a sluggish economy, violent crime, immigration, street gang violence, and land expropriation top the list. High priorities include education, energy, and government effectiveness. Surprise load-shedding yesterday got everyone’s attention and emphasized South Africa’s energy crisis!
Why Load-Shedding and Rolling Blackouts?
I’ve experienced load-shedding in South Africa, but yesterday was the first time during this visit, and I’ve been here since May. Interestingly, there was no formal blackout notification, except for a Twitter message posted the same day the outages occurred. The tweet didn’t specify if it was a “one-off or the start of extended rolling blackouts”.
The blackouts were blamed on “high levels of unexpected breakdowns at coal-fired power plants“. Eskom “cut megawatts from the national grid due to boiler tube leaks at five of its generating units and the breakdown of a conveyor belt used to supply coal to its Medupi Power Plant”. With these shortages, “pumped storage and open cycle gas turbine facilities were used extensively, resulting in lower dam levels and diesel supplies”. Not sure I understand that technical explanation, but the gist of what’s happening seems clear.
Load-shedding occurs in stages, depending on the shortage necessary to meet electricity demand. Stage 1 is the least and Stage 4 the most serious. The Western Cape outage was Stage 2. It lasted from 09:00 to 23:00 and rolling outages ran for a maximum of 2.5 hours. More load-shedding will occur.
Day Trip Cape Town
I was en route to Cape Town for the day to take care of personal business when I heard of the blackouts on the radio. As I traveled the N2 highway, I wondered if there would be chaos in Cape Town. Thankfully, there was little visible evidence of blackouts, but just the same, I decided to forgo an evening in Cape Town and drive back to Hermanus. That meant I had to leave early enough to drive over Sir Lowry’s Pass before dark!
“The ruling African National Congress has unveiled billions of dollars in bailouts for Eskom this year, but failed to agree on reforms to end the utility’s debt spiral.”
On the way back to Hermanus, the N2 near Somerset West is often disorderly. There’s gridlock, bottlenecked traffic, motorcycles dangerously weaving in and out between cars, hitchhikers, vendors selling their goods, road construction, animals and people crossing the highway (yes really), and overloaded bakkies (trucks) with laborers hanging off the sides and out the back. I was driving behind children riding in the back of an old station wagon who were amusing themselves by perilously opening and closing the back hatch – yikes. We played hand waving games until their car turned off.
The Pass is a terrifying stretch of road (at least to me) with no median dividing traffic passing in the opposite direction. Trucks brimming with steel, bricks, lumber, and other heavy materials can tip going around sharp curves. I’ve witnessed horrible accidents along the Pass. Poor nighttime visibility makes it even more dangerous!
I made it back safely, just before dark. The Hermanus blackout began an hour later. More blackouts are expected, so I charged things, got out battery-operated lights, and have ingredients for salads and uncooked meals.
“A new round of blackouts should be a strong incentive for the urgency to address prevailing issues at Eskom.” Piotr Matys, Currency Strategist
Electricity Supply Commission of South Africa (Eskom)
Eskom is the state power monopoly that “generates nearly all of the electricity for Africa’s most industrial nation”. The utility amassed 450 billion Rand ($30 billion) of debt, battles corruption, and relies on government bailouts to remain solvent and avoid collapse. Eskom’s struggle to meet electricity demands is because many of its plants are old and poorly maintained.
Eskom and South Africa’s Economy
The economy suffered its worst slump in a decade when power cuts left factory floors, shops, and smelters in darkness for hours. Current power outages are the first since “Eskom imposed blackouts earlier this year, ravaging the economy and exposing the debt crisis that threatens to push Eskom into bankruptcy”.
In an economy already facing sluggish growth, load-shedding adds even more challenges. This year, it’s estimated to have cost South African economy 1 billion Rand per stage, per day.
The sudden, unexpected return of power blackouts is an embarrassment to President Cyril Ramaphosa who, during a recent campaign to encourage foreign investment, “promised to reform the stricken utility”. Jan Oberholzer, Eskom’s Chief Operations Officer, told the press that the latest cuts will take about “2,000 megawatts of demand from the power grid and could last for a week”.
“Until 2009, Eskom was functioning successfully as a single entity. Once corruption and state capture came into play, the power utility started floundering.” Mike Teuchert, Head of Taxation Services
Corruption, Bailouts, Junk Credit Rating
Years of “corruption and mismanagement under Ramaphosa’s predecessor, Jacob Zuma, left Eskom with surging costs, falling revenues, and a fleet of breakdown-prone, coal-fired power stations”. Older Eskom plants are “near the end of their productive lives, while work on newer, larger coal stations has fallen behind schedule causing Eskom’s debts to balloon”.
This is particularly interesting to me since I was an Eskom consultant years ago at Koeberg Nuclear Power Station. The only nuclear power plant in Africa and South Africa’s most stable energy source, Koeberg was scheduled to close in a few years, but is being revamped to extend its operating life.
Eskom can’t pay back debts without state support, lacks stable internal leadership, and currently has no full-time CEO. The acting CEO is Jabu Mabuza. Eskom weaknesses further endanger South Africa’s credit rating, which is already on the verge of being cut to junk. Outages could “cost the country its last investment-grade credit rating”. Moody’s will deliver its next assessment of South Africa’s economy on November 1.
The Financial Summit “attracts prominent decision-makers, development partners, financiers, and investors from Africa and across the world”. President Ramaphosa told the FT Africa Summit that the South African government was working on “innovative ideas” to turn around Eskom’s debts”. He assured investors Eskom’s governance would be “strengthened by new appointments”.
Moody’s thinks Eskom’s “inability to deliver electricity demand even in spring, when it’s lower than the winter months, is cause for concern”. A “comprehensive and credible restructuring plan must be implemented quickly” to avoid future blackouts that undermine the economy.
Eskom Restructuring and Independent Power Producers (IPPs)
Ramaphosa backs proposals to reorganize Eskom’s debt by the end of October and restructure the utility into three state-owned operating units under a holding company – generation, transmission, and distribution. At this point, maintaining that timeline seems highly unlikely. Some question whether keeping all three entities under Eskom will solve the utility’s financial problems. Unlike other state-owned enterprises, Eskom is essential in ensuring the sustainability of South Africa’s economy.
Trade union allies of the ruling ANC “resist the proposed restructuring plan, and think it would lead to wholesale privatization”. Some say simply splitting the entity and not changing the ownership structure won’t result in debt reduction. They suggest selling off or privatizing one of the entities to help Eskom settle some of its mounting debt.
Eskom bailouts “impact spending on vital services like schools and hospitals,” and many South Africans favor clean, renewable alternative energy sources over coal-fired power plants.
In the midst of another load-shedding crisis, Western Cape Premier Alan Winde proposes Independent Power Producers (IPPs) and urges President Ramaphosa to allow municipalities to procure alternative power. Winde insists municipalities be given the opportunity to bring new, clean power generation on line and procure power from 1-10 MW energy systems.
Are Eskom’s Coal-Fired Power Stations Deadly?
There are new medical studies about health hazards associated with coal-fired power. According to a NASA Earth Science Satellite Data analysis, “Eskom’s reliance on coal for electricity is potentially deadly”. “Mpumalanga, in the Eastern Transvaal, is the second worst SO2 emission hotspot in the world, beaten only by Russia’s enormous smelters.”
The SO2 emission hotspot is the result of high-density, coal-fired power plants in Mpumalanga. “Experts in medical research say high levels of air pollution can shorten human life expectancy by 20 years or more.”
ANC’s Integrated Resource Plan (IRP)
The ANC-backed government “gave assurances that their Integrated Resource Plan (IRP) would be released in September”. Now in mid-October, implementing “the IRP, a blueprint for the generation of new energy, seems like a pipe dream”.
“The DA warns Eskom against using rolling blackouts as a bargaining tool for more money.”
Democratic Alliance (DA) Plan for Eskom
The DA is the official opposition party to the governing African National Congress (ANC). The party is most popular in the Western Cape. It’s “broadly centrist and has been attributed with both centre-left and centre-right policies”. The DA developed a plan to make Eskom “efficient, competitive, and profitable”. Their “Cheaper Energy Bill” is designed to stabilize and secure South Africa’s power supply by breaking Eskom into two separate entities – generation and distribution. They will present a plan to the National Assembly in Pretoria.
The “re-occurrence of rolling blackouts comes as no surprise”. The DA has “long held the view that Eskom’s turnaround strategies and recovery plans amounted to nothing” and that the “embattled utility is more concerned about funding Eskom’s deteriorating operations than making it a profitable, efficient, and stable energy producer”.
Eskom dragged the National Energy Regulator of South Africa (NERSA) to court challenging their decision to allow tariff increases below those they requested. It’s agreed that continuing rolling blackouts will have serious consequences for South Africa’s struggling economy.
The DA is trying to curb the impact of rolling blackouts and has concerns about their impact on students and matric exams. “They’ve received calls from school principals and teachers regarding the impact of rolling blackouts on Computer Applications Practical Exams.”
South Africa’s energy monopoly is detrimental to economic growth. The DA sees Eskom as an organization that “would let the country plunge into darkness before putting aside its pride to stabilize and diversify the grid by bringing on board Independent Power Producers”.
South Africans seem to ignore or take Eskom power outages in their stride, but the real prospect of living with them indefinitely doesn’t appeal. Some wonder if the ANC has a vision for Eskom that reaches “past its political interests”?