Abu Dhabi, UAESunday 26 May 2019

South Africans left in the dark as blackouts return

State utility Eskom is in serious trouble but attempts to split it up and reform electricity provision in the country are hitting challenges

A worker sits in a darkened cafe after the electricity supply is cut off during a load-shedding power outage period in Johannesburg, South Africa, on Thursday, Feb. 14, 2019. Eskom Holdings SOC Ltd. cut supplies for the fifth day on Thursday and warned its power generation system remains "vulnerable." Photographer: Waldo Swiegers/Bloomberg
A worker sits in a darkened cafe after the electricity supply is cut off during a load-shedding power outage period in Johannesburg, South Africa, on Thursday, Feb. 14, 2019. Eskom Holdings SOC Ltd. cut supplies for the fifth day on Thursday and warned its power generation system remains "vulnerable." Photographer: Waldo Swiegers/Bloomberg

Cape Town // It was almost possible to hear a collective groan of "not again" rattle around South Africa as the country was once again hit by rolling electricity blackouts.

Around February 4, a balmy summer's Sunday, which most South Africans use to kick back with family and friends, the state energy utility Eskom announced blackouts would be implemented over the next week. And, it said, these would be "Level 4" power cuts, the most serious level before a complete nationwide electrical cut-off.

As Monday rolled around and the markets came on line, the South African currency the rand had its worst week in more than a year, breaching the crucial 14 to the dollar level over the next few days, losing almost 5 per cent against the greenback in total. The economic knock-on of the rand’s fall will be felt quickly, as fuel prices are set to soar.

“Thanks to Eskom's massacre of the rand, indicators point to increases of 42 cents per litre for petrol and 59 cents per litre for diesel in March,” says Louis Nel, a Durban-based consumer advocate.

For now, Eskom is managing the shortage by selectively cutting off towns and suburbs, and rotating the schedule to lessen or, rather, evenly spread the hardship. At stage four, power is cut in tranches three times a day. In total, consumers lose up to 7.5 hours a day in electricity supply.

South Africans countrywide hastily tried to reorganise their lives around their scheduled power-outages. A load shedding app available online that had languished for months with a few thousand users, leapt to half a million downloads in days.

“We just gave up what we were doing and went to the beach,” says Prince Marechera, a Zimbabwean student living in a commune near the Nelson Mandela University in Port Elizabeth. “We were cut off in the morning during class, then again at 6pm when I normally try cook before studying. If this keeps up, I’ll begin to fall behind in my studies. We all will.”

The immediate cause of the latest blackout was the failure of six generating stations. This forced Eskom to rely on remaining, mostly coal, power stations plus a growing fleet of wind and solar plants. Eskom also has a few diesel-powered plants that were originally intended to help out at peak demand.

These, however, eventually ran out of fuel. According to the acting head of generation at Eskom, Andrew Etzinger, the utility had been burning a cool 100 million rand a day in diesel, briefly depleting national supplies. By Friday, February 15, more diesel had been imported and the turbines were fired up again.

However, according to Eskom, the power grid remains "constrained" and new blackouts could follow at any time. Eskom itself is in deep trouble, to the tune of 440 billion rand (Dh114.52bn) in debt. Much of this is related to mega-coal stations under construction.

The Medupi and Kusile plants were supposed to add almost 9,600 megawatts to the grid; by comparison Abu Dhabi has a capacity of 12,500MW. Both South African plants were to be fully operational in 2015, but are still years away from completion. Minister for public Enterprises Pravin Gordhan admitted in Parliament this month that the projects were failures. Last week South Africa's Sunday World reported that the costs for the plants have escalated significantly to over 300bn rand in total; for Medupi, up from an originally estimated 24.9bn rand to145bn rand and for Kusile from 80.7bn rand to 161.4bn rand.

“The first point we need to tell the public is that Medupi and Kusile were badly designed and badly constructed and are not performing at optimum levels,” Mr Gordhan said.

Acting director general of the department of public enterprises Thuto Shomang told MPs this month Eskom's 420bn rand debt burden represents 15 per cent of the sovereign's debt and that if the power utility defaults on its debt‚ it will threaten the economy.

In addition the utility has come under fire for its links to the discredited Indian-born Gupta family.

For years the family had seemed untouchable, repeatedly implicated in corruption by state officials, email leaks, and senior politicians, but apparently protected by their close friendship with then President Jacob Zuma.

The Gupta brothers were accused of vetting ministerial appointments and of using their influence to siphon money from state contracts. They hired the president's son, Duduzane, to work for them, and repeatedly denied any wrongdoing. However, in February last year President Zuma had announced his resignation, and the three Gupta brothers were found to have vanished abroad.

In November, BusinessReport said Eskom had paid a Gupta-owned mine nearly 1bn rand in 2018 for coal it has not received, despite the utility flagging that its coal supply was at record lows that has lead to blackouts. Eskom paid 705 million rand to Optimum Coal Mines since March, because of contractual obligations largely engineered by former mineral resources minister Mosebenzi Zwane and axed-acting group chief executive Matshela Koko.

On Tuesday, minimgx, an independent news and analysis organistaion, reported African Exploration & Mining Finance Company, owned by the South African government, said it had been awarded an option to bid for Optimum Coal Mines after business rescue practitioners accepted the firm’s post-commencement funding of some R1bn.

There is a dispute among Optimum Coal Mines creditors led by a company called Centaur, which do not want Eskom to have a vote on the outcome of the rival bids. The matter is heading for the courts.

Eskom’s troubles could not come at a worse time for the ruling African National Congress, who must fight an election in May amid a rising challenge from opposition parties that have seized on the blackouts as their campaigns heat up.

The main opposition Democratic Alliance (DA) launched a series of large billboards around the country that said in huge letters "The ANC is killing the lights". The billboards were promptly vandalised and burned or torn down. The DA quickly replaced them, only to see them destroyed again.

In response to the latest billboard being vandalised, DA chief whip John Steenhuisen said the party would keep putting them back up.

“Can’t keep the lights burning so burn billboards instead?,” Mr Steenhuisen responded to the latest billboard sabotage, via Twitter. “Obviously the truth hurts, the billboard will be up again shortly to keep reminding our citizens that we don’t have an Eskom problem, we have an ANC problem!”

Perhaps coincidentally, in early February just prior to the latest blackouts, the president of South Africa Cyril Ramaphosa said in parliament that Eskom would be broken up in the near future. Power generation, electricity transmission and distribution would become three separate entities.

“This restructuring will align Eskom with international electricity trends, to enable better oversight, a single-buyer model and increased competition,” Mr Ramaphosa told parliament.

Days after Mr Ramaphosa’s announcement, the power cuts began. This prompted some to see a link between the two and speculate the sudden electricity outages were an attempt to embarrass Mr Ramaphosa and get him to change his stance on breaking up Eskom.

The country’s powerful trade unions have vowed to fight any restructuring that could lead to job losses, and labour movements here have a long tradition of using sabotage of infrastructure to get their point across.

South Africa’s largest newspaper The Sunday Times reported over the weekend that Mr Ramaphosa’s government had ordered extra police and military protection for power stations in response to possible sabotage. However, Mr Gordhan has since denied extra security was requested.

“As far as the Department of Public Enterprises is aware, no requests have been made to the police or military to protect power stations, as no industrial actions have been instituted, nor have public protests been called for at this stage,” Mr Gordhan said last week.

South Africa is not the only developing country experiencing electricity problems. Nigeria, with a population of 150 million and Africa’s largest economy produces only 4,000MW, less than half that of Abu Dhabi, which must service the electricity needs of 1,2 million people.

In January, the Transmission Company of Nigeria (TCN) announced a planned power outage in some parts of Lagos and Ogun States between 8am and 5pm on certain days that month.

A report last year by the Centre for Global Development found that In some of the continent’s largest economies like Nigeria, Angola, and Ghana, more than 25 per cent of businesses lose double-digit sales due to power outages - with some firms averaging losses of 31 per cent.

Vijaya Ramachandran, the study’s lead author and a senior fellow at CGD, said: “We found that unreliable power can have a major impact on businesses, dampening their growth prospects and undermining job creation opportunities.”

South Africa has a dire unemployment problem but, unlike most African countries, it does not have the peasant-culture that allows people to become independent food producers outside the formal cash economy. Most, therefore, depend on jobs to earn cash money in order to survive.

The economy grew only about 1 per cent in 2018, latest government data shows, and it is economic consensus that South Africa needs 5 per cent growth to achieve job creation.

“An electricity crisis soon becomes a governance crisis, since all services depend on electricity,” says Johannesburg based author and artist Sizwe Mpofu Walsh. “An electricity crisis also soon becomes an economic crisis, since power and production are linked.”

Eskom itself though will probably have to shed jobs. The company’s own figures show that in 2003 it employed 32,000 people; today that number stands at 47,600, while still producing about the same amount of electricity.

Getting the unions, and even the bulk of the ANC itself to be on board with desperately needed changes to Eskom’s structure will be the defining task facing Mr Ramaphosa’s presidency, if he wins the upcoming elections as expected.

Should he fail, so will Eskom and with it, sub-Saharan Africa’s only industrial economy.

Updated: February 21, 2019 01:28 PM

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