South Africa is facing critical social and environmental challenges. Corruption, sluggish economy, violent crime, unemployment, an ongoing energy crisis, immigration, street gang violence, land expropriation, and drought top the list. High priorities include government effectiveness, education, and energy. Surprise load shedding yesterday emphasized South Africa’s growing energy crisis and captured everyone’s attention!
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 as the outages. The tweet didn’t specify current outages as one-off or the start of dreaded 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 recent shortages, “pumped storage and open cycle gas turbine facilities were used extensively, resulting in lower dam levels and diesel supplies”. Putting this technical explanation aside, the gist of what’s happening is clear.
Load-shedding occurs in stages, depending on the shortage necessary to meet electricity demand. Stage 1 (3 times over a four- to eight-day period for 2 to 4 hours at a time) is the least and Stage 4 (12 times over a four- to eight-day period for 2 to 4 hours at a time) the most serious. Stages 6, 7, and 8 exist but are rarely experienced and sound terrifying! Today’s Western Cape outage was Stage 2 with blackouts lasting from 09:00 to 23:00 and running for about 2.5 hours each. Future rolling blackouts are predicted.
Day Trip Cape Town
I was en route from Hermanus to Cape Town for the day when I heard about 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. Just the same, I decided to forgo an evening in Cape Town and drive back to Hermanus. That meant leaving early enough to drive over Sir Lowrys 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 weaving in and out between cars, carjacking, hitchhikers, vendors selling their goods, road construction, animals and people crossing the highway (yes really), and overloaded bakkies (trucks) with people hanging off the sides and out the back. I was driving behind children riding in an old hatchback station wagon who were playing and amusing themselves by opening and closing the back hatch – yikes. We exchanged animated hand waves, and then thankfully, they exited the freeway.
The Pass is a terrifying stretch of road (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 night visibility and drivers “under the influence” make it even more dangerous!
I made it back safely, just before dark. The Hermanus blackout began an hour later. Since more blackouts are expected, I charged things, got out battery-operated lights, and sorted food for salads and other 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
The Electricity Supply Commission of South Africa (Eskom) is a state-owned power monopoly that “generates nearly all of the electricity for Africa’s most industrial nation”. The utility has amassed 450 billion Rand ($30 billion) of debt, battles corruption, and relies on government bailouts to avoid collapse and remain solvent. Eskom is struggling to meet South Africa’s electricity demands, since many of its faltering power plants are old and poorly maintained.
Eskom and South Africa’s Failing Economy
Earlier this year, South Africa’s economy suffered its “worst slump in a decade,”: when power cuts left factory floors, shops, and smelters in darkness for hours. October power outages are the first since February 2019 when “Eskom-imposed blackouts that ravaged the economy and exposed the debt crisis threatening to push Eskom into bankruptcy”.
In an economy already facing sluggish growth, load shedding adds more challenges. This year, it’s estimated to have cost South African economy one 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 grid and could last for a week or longer”.
“Until 2009, Eskom was functioning successfully as a single entity. Once political 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 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. Instead, it’s being revamped to extend its operating life.
Eskom can’t pay back its 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 teetering on the verge of being cut to junk. Outages could “cost the country its investment-grade credit rating”.
The FT African Financial Summit “attracts prominent businessmen, financiers, investors, development partners, and decision-makers worldwide”. President Ramaphosa told the FT Summit that the South African government was working on “innovative ideas and new appointments” designed to turn around Eskom’s debt and “strengthen its governance”.
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. Moody’s delivers its next assessment of South Africa’s economy on November 1.
Eskom Restructuring and Independent Power Producers
Ramaphosa backs proposals to reorganize Eskom’s debt by the end of October 2019 and restructure the utility into three state-owned entities under one holding company. The entities include generation, transmission, and distribution. At this point, maintaining that timeline is unlikely. Some question whether keeping all three entities under Eskom will solve the utility’s financial problems. Unlike other state-owned South African enterprises, Eskom operations are essential for a sustainable economy.
Trade union allies of the ruling ANC like the Congress of South African Trade Unions (Cosatu), “resist the proposed restructuring plan, and think it would lead to wholesale privatization”. Some say splitting the entity and not changing the ownership structure won’t result in debt reduction. They suggest selling off or privatizing one entity 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 consider allowing municipalities to procure alternative power. Winde insists municipalities be given the opportunity to procure power from “grid connected solar photovoltaic power plants” like 1-10 MW energy systems and bring new, clean power generation on line.
Are Eskom’s Coal-Fired Power Stations Deadly?
There are new medical studies about the health hazards associated with coal-fired power. According to a recent 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, next to Russia’s enormous smelters.”
The SO2 emission hotspot is the result of high-density, coal-fired plants in Mpumalanga. “Medical research experts say high levels of air pollution shorten human life expectancy by twenty years or more.”
ANC’s Integrated Resource Plan
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 Plan for Eskom
The Democratic Alliance (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 more “efficient, competitive, and profitable”. The goal of the “Cheaper Energy Bill” is stabilizing and securing South Africa’s power supply by breaking Eskom into two separate entities – generation and distribution. They will present a plan to the South African National Assembly in Pretoria.
The “re-occurrence of rolling blackouts is not a surprise”. The DA has “long held the view that Eskom’s turnaround strategies and recovery plans amounted to nothing” and the embattled utility “is more concerned about funding Eskom’s deteriorating operations than making it a 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. Immediate concerns include the effect on student matric exams. “They’ve received calls from school principals and teachers regarding outages impacting 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 the grid by bringing on board Independent Power Producers”.
South Africans are complacent about the dire situation, taking Eskom power outages in their stride. The prospect of living with them indefinitely doesn’t appeal, and some wonder if the ANC has a vision for Eskom that reaches beyond its “political interests”?