OP-ED: Power cuts will stifle South Africa’s post-Covid economic recovery

2020-09-04 07:27:00 PM

OP-ED: Power cuts will stifle South Africa’s post-Covid economic recovery

Coal-Fired, Electricity

OP-ED: Power cuts will stifle South Africa’s post-Covid economic recovery

Load shedding is expected to continue for several years as Eskom grapples with ageing infrastructure and a legacy of neglect and mismanagement. Private electricity generation will ease the pain.

Lockdowns imposed in South Africa and elsewhere to curb the spread of Covid-19 tipped the domestic economy into its worst recession in nine decades, and business, industry and government have scrambled to get back up and running as restrictions are eased.

By the end of the month, the amount of power reductions for the year had already exceeded the levels seen in 2019, which was the worst year on record.Self-generation in the private sector has already begun, with an estimated 1.1 GW (1,100 MW) of capacity installed – the equivalent of one full stage of load shedding. But policy paralysis and cumbersome, time-consuming regulations are still hobbling a process that could address the widening gap between supply and demand of electricity within just six to 18 months.

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Save Eskom’s unexpected escalation of load shedding this week has confirmed that South Africa’s post-Covid-19 economic recovery will be throttled by energy constraints, and that unless swift action is taken to support private electricity generation, crippling power cuts will continue for years.Save Cyril Ramaphosa, South Africa’s walking president, set tongues wagging when he first took office thanks to his habit of taking a brisk morning walk.Save In a few short but seemingly endless months, an infinitesimal and invisible force has brought even the wealthiest and most resourced countries to their knees..

In the meantime, a big shake-up is taking place at Eskom Generation, with the former CEO of the Eskom Generation Division shifted out of the way. The power station managers at Tutuka and Kendall power stations were also summarily dismissed yesterday pending disciplinary inquiries, and further interventions at Kriel and Duvha power stations are under way. President Cyril Ramaphosa during his early morning walk on February 07, 2018 in Cape Town, South Africa. Lockdowns imposed in South Africa and elsewhere to curb the spread of Covid-19 tipped the domestic economy into its worst recession in nine decades, and business, industry and government have scrambled to get back up and running as restrictions are eased. Did this catastrophe need to happen? The answer is no. Display Adverts But with the pickup in demand for electricity, Eskom’s ageing infrastructure immediately took strain and multiple breakdowns forced the utility to resume load shedding in July to protect the national grid. (Photo by Gallo Images / Brenton Geach) These moments proved more than just an opportunity to engage directly with a world leader, they highlighted the social value and cohesiveness that comes with breaking down physical barriers and bringing our streets to life with human interaction. By the end of the month, the amount of power reductions for the year had already exceeded the levels seen in 2019, which was the worst year on record. The first event began with a heated public debate in the build-up to the 1994 elections.

Eskom insists that its new programme of stepped-up maintenance, which aims to address decades of neglect and mismanagement, will end load shedding within 18 months. In other parts of the world, French President Emmanuel Macron and Danish Prime Minister Lars Lokke Rasmussen can take a bike ride through Copenhagen without much ado, or Thai King Maha Vajiralongkorn can cycle undisturbed in Lucerne, Switzerland, or Icelandic Prime Minister Katrin Jakobsdottir can stroll, unaccompanied by a security detail, to her office. Yet, many simply did not have the means to do so. But it is increasingly clear that this target will not be met, given the scale of problems at its poorly performing coal-fired power stations. The solution is for the government to take bold policy initiatives enabling all of Eskom’s customers – industries, municipalities, businesses, farms and households – to rapidly bring on new generation capacity with reliable, low cost and environmentally friendly wind and solar PV installations, together with battery storage Self-generation in the private sector has already begun, with an estimated 1. The combined result is a spatially distant approach, an uncoordinated hive of separateness.1 GW (1,100 MW) of capacity installed – the equivalent of one full stage of load shedding. But the capacity of public health resources to meet the demands of the early critical containment phase was quickly overwhelmed. But policy paralysis and cumbersome, time-consuming regulations are still hobbling a process that could address the widening gap between supply and demand of electricity within just six to 18 months. It should be the norm. Her reason for this, she told me, was that the ANC was bourgeois.

In the midst of the crisis that South Africa now faces, the steps the government has taken to enable self-generation are too little, and may quickly become too late. By 2030, several of Eskom’s old coal-fired plants are due to be decommissioned, taking about a quarter of its existing capacity offline, and there is nothing in the pipeline to replace them. Separate, but not equal Much of our current situation is attributable to the apartheid-era planning approach, although it must be said that, in recent years, unchecked crime and the associated fear of hijackings and home invasions have buoyed the development of estates and walled communities. But a report in 2017 noted that public health represented only 2. “South Africa has reached a stage where the country simply doesn’t have enough generating capacity which is reliable and which is going to enable the economy not only to recover from Covid-19, but to make any sort of progress over the next 10 years,” says Roger Baxter, CEO of the Minerals Council of South Africa. “As a country we must understand that we have got to a point where government has run out of options and that they have no choice but to bring in private sector participation. Between the broken infrastructure and the traffic, it’s becoming harder and harder to walk the city in Gauteng, and indeed around the rest of the country. Without a reliable electricity grid, without diversified supply and real competition on the generation side of the business, South Africa can’t grow its economy at all. Unfortunately, the situation in other countries around the world, including in low- and middle-income countries, does not differ. The SACP, with its large parliamentary presence (as part of the ANC contingent), was silent about the increase.

It’ll be gridlock. In recent years, and in recognition of this fact, there has been some good progress made to correct the imbalance.” South Africa’s economy grew at an average rate of 4.5% between 2001 and 2008, but in the past decade, growth has averaged 1. Under former Johannesburg mayor Parks Tau, and subsequently under the Democratic Alliance-led administration, upgrades were affected to streets and parks in Soweto and several inner city precincts. In the absence of a raging epidemic like Covid-19, this bulwark against such threats is rapidly forgotten.5%, shrinking to less than 1% in the past three years. Baxter says that electricity constraints were a big factor, and that the mining sector alone could generate 2. A call for collective action The problem is that issues around urban planning, opposing the mushrooming of shopping malls and walled estates are far from being “sexy” topics. They had kept quiet when accused of being racist; that they were querying the matter only because most MPs were now Africans.

3 GW (2,300 MW) of its own power to help alleviate the pressure on Eskom. Even when there are no epidemics in sight, the benefits of a strong public health system are clear. The Council for Scientific and Industrial Research (CSIR) predicted in August that load shedding would carry on for two to three years in the absence of enabling regulations to allow and even incentivise “customer response at scale” with self-supply options to supplement Eskom’s existing grid capacity. Investment in streets, squares, parks and other public amenities does not return a dividend that can easily be reflected on a balance sheet and, superficially considered, it is, therefore an unattractive development proposition to both the public and the private sector. “It’s a burning platform that we are on – we need to be moving faster, we need to be doing more,” CSIR chief engineer Jarred Wright said during a presentation of research on the crisis. “An urgent response is needed to both ensure short-term adequacy and to get South Africa on the path to long-term adequacy. What is so desperately needed is greater interaction between professionals and government, and ongoing consultation with communities to understand how to breathe life into our cities.2%, diabetes deaths decrease 1.” Scaling up self-generation, which could be installed as early as this year, would be the first step, he said. In a word, they were part of a small group best placed to be mortified by their own sometimes lifelong comrades accusing them of racism.

The second was completing the Emergency Power Procurement Programme that the government committed to in December 2019, seeking to add between 2,000 and 3,000 MW to the country’s electricity grid by enlisting the help of the private sector. This is where society interacts, where culture thrives, where the economic pulse is tangible, and the social contract is visibly enacted. But progress has been slow, with the Department of Minerals and Energy only extending requests for project proposals in August – nine months later. A multitude of professional staff with different skill sets are required in an intermediate care isolation service —doctors, clinical associates, nurses (registered and cadres) and, very importantly, allied health professionals including physiotherapists, occupational therapists, dieticians and psychologists. The timeline to completion is mid-2022, but given the government’s bureaucratic and sluggish approach to procurement, it may take a year longer. What is so desperately needed is greater interaction between professionals and government, and ongoing consultation with communities to understand how to breathe life into our cities. The third step identified by the CSIR is implementation of the department’s latest Integrated Resource Plan (IRP), a long-term strategy for the country’s future energy mix that was released last October – eight years behind schedule. Evidence that Eskom’s infrastructure cannot cope is the steady decline in its EAF (energy availability factor), which is the percentage of maximum energy generation that a plant is capable of supplying to an electrical grid over a given period. Coupled to this should be a greater debate and reflection about the type of society we hope to see in the future. A recent study showed that three basic public health interventions – scaling up treatment of high blood pressure to 70%, reducing sodium intake by 30% and eliminating the intake of artificial trans fatty acids – could save 94-million lives in 25 years. This is to say they knew – and they taught others to know – that the exploiters had to turn the exploited into non-people for the fruits of the exploitation to be devoured without guilt.

It fell from more than 90% two decades ago to about 67% in 2019, and has hovered at an average of 66.1% percent so far this calendar year. Given those in the economy who need to work in teams or manufacturing, it is unlikely that manufacturing infrastructure will disappear, but Covid-19 has crystallised how easy it is to decentralise work and ensure greater flexibility in how we structure our time, where we live and what we require of our homes and our community spaces. The IRP 2019 and the Eskom recovery plan target an EAF of 78% by the end of 2020, but this is looking hopelessly unrealistic.40 per person per year in low-income countries. Eskom’s maintenance drive is vital for stability of supply in the near term, but the utility cannot resurrect its aged infrastructure, and the best which can be hoped for is stabilisation of the EAF at its current, low levels. It’s about ensuring, in particular, that poorer communities get the necessary Fourth Industrial Revolution tools – such as free wi-fi or access to libraries with complimentary internet – to enable them to leapfrog into a greater economic participation. Eskom acknowledges that its outdated, vertically integrated electricity supply model is at odds with the global shift towards disaggregated networks, micro grids, distributed generation, smart grids, and embedded generation in the private sector. Moreover, the specifically African “race” of South Africa was implicitly seen to be classless, without any class divisions.

Last year, President Cyril Ramaphosa announced plans to separate the utility into generation, transmission and distribution units, but the utility has since indicated that significant headway is difficult before its mammoth and steadily increasing debt burden of R488-billion has been restructured. While it’s easy to consider the digital reality for institutions such as private schools, which can certainly teach remotely, this is much more of a challenge in poorer communities and townships. And when an infectious disease does spread widely, public health provides the tools to identify the epidemic and monitor it, as well as the means for reaching into communities. Ironically, a similar plan was drawn up 22 years ago. Eskom has to borrow to service its debt, and if it were not for the latest government bailout of R49-billion, it would not have been able to meet its repayments of capital and interest in the last financial year. But there is another side to this debate: the social isolation and community estrangement caused by protracted isolation. In a report presented to Parliament last week, Eskom said that as its debt had climbed ten-fold in the past decade, while tariffs had only increased five-fold, its electricity prices were still too low and not cost-reflective. There is increasing evidence that mitigation measures put in place, such as movement restrictions, mask-wearing and physical distancing, have been making a difference in some epidemic hotspots. Baxter believes it is unfair for Eskom to insist that tariffs must reflect the cost of its borrowing because much of the debt stems from corruption and mismanagement, particularly related to the construction of Medupi and Kusile, two new power plants that are now more than six years behind schedule and five times more expensive than originally planned. As part of the human experience, this is an emerging trend which those tasked with planning our cities and our homes must consider. In 2003, as part of the government’s strategy of creating a black bourgeoisie, it “outsourced” one of its state-owned enterprises (SOE) to a large British transnational corporation that, together with African owners, bought 51% of the enterprise.

“Pricing is a big issue. Competitive pricing and pricing predictability are as important as electricity availability,” Baxter says. This highlights the importance of reactivating our streets, breathing new life into our underutilised high streets and working to make isolated shopping malls more interactive. At the same time, we must remain cognisant of the cost of these measures. DM Chris Yelland is the founder of EE Business Intelligence, and Mariam Isa is an independent financial journalist .