South Africa’s slow decisions on customs duties are hurting the economy, with the unclear role of finance and trade ministers causing most ... of the damage, XA Global Trade Advisors CEO Donald MacKay told an online briefing.
Heavy capex is needed for maintenance, but additional capacity is also needed to be able to take units down, he said. “Extra capacity is needed just to maintain what we have,” before any of the ageing plants are closed.
According to the Bureau for Economic Research (BER) at Stellenbosch University, Eskom’s core problem is a sustained decline in the availability of installed generation capacity due to lack of maintenance of ageing coal-fired power stations. Until additional private-sector power generation capacity is available, the BER says, loadshedding will remain a constraint on South Africa’s GDP growth.
- Oberholzer bemoaned the fact that Eskom does not make its own procurement decisions, but has to wait for Treasury approval. Spending decisions can take between 70 and 90 days, he said. “It’s not the right process.”
- Covid-19 infections over the last eight to nine days are having an impact on performance, Oberholzer said. “The performance is extremely poor. We need to fix it. The economy of the country depends on it.”
Eskom operates 15 coal-fired power stations that generate more than 80% of the country’s electricity. Some of these stations are near the end of their lives. Out of an installed capacity of 46,000 MW, nearly half is scheduled to be closed by 2035. The company said in November that it has “clear evidence” that sabotage is one of the issues affecting supply.
- “I do see light at the end of the tunnel,” Oberholzer said. “There isn’t a train coming at us. We will turn it around.”
He was short on specifics as to how that will be done, and who will pay for it. Renewable energy sources, Oberholzer said, can’t provide the whole solution. Eskom is starting to look for renewable storage options, but the intermittent nature of renewable power and current lack of storage means closing 10 MW of current baseload generation would require 30 MW of renewables capacity to be added, he says. Extensive new transmission infrastructure also needs to be built despite the fact that no-one wants it in their backyard, he said.
Purchasing decisions at the Treasury are sometimes based on political expediency rather than grid considerations, Lungile Mashele, an energy specialist at the Development Bank of Southern Africa, told the briefing. The company faces a “chicken and egg” situation as poor performance restricts its capacity to bring in new funding which is needed to improve performance, she said.
- Increased use of gas will be crucial to balance the fluctuating availability of renewable energy sources said Mashele, formerly an energy economist at Eskom.”
Energy consultant Mike Rossouw argued at the briefing that closing old plants and improving available as opposed to installed capacity is the top priority. Eskom, he said, does not in fact need any new capacity. He likened Eskom to a donkey pulling an impossibly heavy cart that has collapsed to the ground, leaving the donkey dangling in mid-air.
- “Unless we remove the weight from the donkey, the donkey can’t move forward. If not, South Africa is going to shut down. That’s it.”
Eskom sees slow response from the Treasury on spending decisions as a constraint on its ability to juggle the load.
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