Why is South Africa experiencing an energy crisis?

by MMC
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Despite government promises to address it, South Africa’s energy crisis has persisted since 2008. Decrepit and poorly maintained power stations, run by the state-owned Eskom, cannot provide enough electricity to the country. Legal and technical obstacles have delayed plans to buy more electricity from private suppliers. President Cyril Ramaphosa, who faces a tough re-election in 2024, appointed Kgosientsho Ramokgopa as the new electricity minister in March to deal with this crisis. But Ramokgopa has not made much progress in reforming Eskom. In December, Dan Marokane became Eskom’s new CEO, the 15th person to take the helm since 2007.

Eskom suffers from financial losses, poor planning and corruption scandals. During former President Jacob Zuma’s nine-year rule, Eskom’s management was in disarray and a judicial investigation found that Zuma’s allies attempted to plunder the company with his blessing. Zuma has denied any wrongdoing. Eskom executives argued they could not charge enough to cover their expenses. Andre de Ruyter, who resigned as CEO in February, has written a book accusing politicians and the new Eskom board of interfering in his work. Pravin Gordhan, the minister responsible for Eskom, rejected the allegations.

Marokane, who previously headed Eskom Group’s capital division, will take on the role of CEO by the end of March after a lengthy and contentious search process that strained relations between Gordhan and the board. In October, Mpho Makwana stepped down as Eskom chairman and was replaced by Mteto Nyati, a former executive at telecommunications company MTN Group.

Load shedding darkens South Africa’s outlook

Eskom’s intentional power cuts, which can last for hours, affect water supplies, food security and healthcare. These power cuts, known as load shedding, hurt businesses and deter investors in a country that relies on electricity for its key industries, such as mining. The government estimates that power cuts will cost the country 300 billion rand ($15.8 billion) in 2022. The central bank and National Treasury predict the economy will grow less than 1% this year, not enough to keep pace with population growth. .

National Treasury is providing Eskom with R254 billion in debt relief over three years, which will help it fund repairs and upgrades to its transmission and distribution network. The bailout package unveiled in February will also strengthen oversight of Eskom and allow private partners to help it manage its factories and transport network. The government also made it easier for companies to build their own power plants by removing licensing requirements. They will also be able to sell their surplus electricity to the network.

Coal is king in South Africa

South Africa has a lot of coal and 90,000 people work in the mines that supply Eskom. The ruling African National Congress party is reluctant to disrupt the industry, not least because miners are a large voting group. Eskom was founded in 1923 and quickly built coal-fired power stations, driven by the needs of its gold mining industry, the largest in the world. In the 1970s, it began building a new fleet of power plants that still operate today, as well as Africa’s only nuclear power plant.

In 2007, it announced plans to build two huge new coal-fired power stations – Medupi and Kusile – which were to be completed within eight years at a total cost of R163 billion. However, the construction process was marred by social unrest, mismanagement and equipment defects. The likely final cost was more than R460 billion and the two facilities are still not operating at full capacity.

The country’s dependence on coal, the dirtiest fossil fuel, for four-fifths of its energy production has consequences beyond its borders. When burned, coal emits almost twice as much carbon dioxide as natural gas. Getting countries to abandon coal is part of the global effort to limit climate change. At the COP26 climate summit in Glasgow in 2021, the United States, United Kingdom, European Union, Germany and France offered South Africa $8.5 billion in funding to help it transition to more climate-friendly energy sources. However, government officials have suggested that coal plants could continue to operate beyond their planned retirement dates due to severe energy shortages.

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