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Just eight crazy stages to catapult SA back into the stone age

12 November 2021 Gareth Stokes

Yesterday I watched some entertaining YouTube footage of a Cayman croc attempting to take a bite out of an electric eel. Big mistake, for the croc that is! “This is not South Africa, croc,” I chortled. “The eels in South America are fully-charged and ready to shock an attacker senseless, 24/7, 365”. According to the Google, an electric eel can zap you with up to 800 volts, which is enough to cause you to jump in pain, or in extreme cases lose consciousness. And that, dear reader, is the lightest introduction I could contrive for the rather sombre topic of Eskom’s decades-long struggle with power generation.

Everybody’s favourite electricity provider

On 8 November, our favourite and only electricity provider announced that Stage-4 load-shedding would be implemented for a period of five days. Load-shedding, for the uninformed, is a process whereby demand is closely managed to match supply and thereby ensure the stability of the national electricity grid. In South Africa, this is achieved by rotational load-shedding, whereby sections of the grid take turns to be switched off for a few hours at a time. Failure to do so could result in a system-wide collapse. The duration and frequency of these managed power outages varies based on the extent of the demand and supply mismatch, beginning with Stage-1 and escalating to a virtually power-free Stage-8. For example, under Stage-4, the average business or household can expect three power cuts per day, totalling 7.5 hours. 

Why should stakeholders in the financial services sector care about the occasional power trip? The short answer is that these power interruptions are massively disruptive at both the business and individual level. Businesses either have to run expensive dirty, noisy and thirsty diesel generators or install costly UPS or solar and battery solutions to maintain output. Their employees, meanwhile, struggle to produce consistently or, in the worst case, have to sit idly by while they wait for the power to return. In keeping with the title of today’s article, we have concocted an ‘eight stages to catapult SA back into the Stone Age’ diatribe to muse over some of the negative consequences of our current reality. 

Let us begin then with Stage-1, which I will label: The scarred national psyche. It is difficult to maintain a positive outlook when your country is diving down the rankings of global electricity producers. Two decades ago, Eskom scooped the honours as best-managed power utility in the world at the Financial Times Global Energy Awards in New York… Nowadays, the only award Eskom is in line for is the Africa ‘Edge of Darkness’ stone obelisk, display cabinet not supplied. It is embarrassing to be part of a nation that once boasted 30% electricity generating capacity surpluses and today struggles to keep the lights on. The bottom line: load-shedding is good for shaving a point or two of the country’s business confidence index. 

The staggering economic cost of power outages

Our Stage-2 gripe centres on the staggering economic cost of power outages on the South African economy. I could spend hours trawling economic papers to breakdown these costs; but prefer the lazy hack’s option of trawling a few of the local news sites. In January this year, economist Mike Schussler estimated that Eskom’s load-shedding was costing the economy around R700-R800 million per day; but there are dozens of other estimates being bandied about. Suffice to say, that the cost to the SA economy in GDP contraction, job losses and missed opportunities going back a decade must run into trillions of rand. 

Stage-3, I have chillingly baptised, choking on our own smoke. The 2021 United Nations’ Climate Change Conference (COP26) in Glasgow, Scotland, set out to get countries to recommit to tough carbon emissions standards by 2030, and to net-zero emissions by 2050. A noble cause, except if you are part of the South African delegation… We used our dismal carbon emissions performance, dominated by the likes of Eskom and Sasol, to advocate for a range of financial packages to assist us in gradually moving to cleaner energy. Yes, you read correctly, we are asking the West to give us money to fix our mess. PS: I am not so naïve as to believe this money has no strings attached or benefits for the lenders… As an aside, I recently watched a virtual question and answer session featuring Eskom CEO, André de Ruyter, in which he claimed spending money on cleaning up some of the power providers current plans would be “a waste of money”. 

Stage 4 is a little something I like to call run it till you burn it. This phrase refers to the triple whammy of running emergency power infrastructure as part of the base capacity; blowing your entire annual diesel budget over a handful of months; and well, using your most cost inefficient asset to produce increasing amounts of electricity.

Back in 2020 it was estimated that Eskom’s emergency diesel generators could produce a kilowatt hour at around R27 per. And that compares to the around R1.90 per that the municipal end-users pay! The R2 – R27 equation does not look good; but we will allow you, dear reader, to do the math on this one. In our alternative reality, government actually instructs Eskom to operate in this way. Just recently: “Keep the power going for election day, we will deal with the consequences down the road”. And we did… 

No awards for flagging corruption as an issue

Enter Stage 5, which I call opportunities for grand scale corruption. There is no better environment for corruption than a cadre-managed monopoly that has to buy truckloads of input material. And in Eskom’s case, one would only need a degree in reading to unpack the nonsense happening in coal and diesel supply, let alone the mega builds at Kusile and Medupi. Recently, a story surfaced of Eskom employees’ involvement in a fuel theft syndicate costing the company around R100 million per month. This is likely just the tip of the iceberg, because there are also countless allegations of approved diesel tenders that amount to little more than theft given the ridiculous prices being paid for bulk supply. 

I have called Stage 7 the head-in-the-sand approach to problem solving. The first signs of this stage exhibited in 1998, when alarm bells about Eskom’s ageing infrastructure were first sounded. Back then, the Department of Minerals and Energy warned that we would run short of energy within the decade, unless quick action was taken. Alas, the warning went unheeded, and our political decisionmakers’ heads remained up to the neck in the soft sand. This approach continues, with critical decisions on independent power producer (IPP) tenders being delayed to the great detriment of certain private sector partners. And by all accounts, awarding of tenders in the latest IPP round are sketchy too. But that is a topic for another day. 

The loony toons solution to SA’s carbon emissions crisis

Finally, Stage 8, the loony toons of solving dirty power with dirty power. We have listened anxiously to recent mutterings from both Eskom’s management and government. The latest round of load-shedding has upped the rhetoric, with all parties calling for quick solutions to the power capacity issue. And that has the usual suspects rubbing their hands glee. Because rush jobs in the ZAR multi-billion contract space create countless opportunities for graft. This writer hopes he is wrong; but suspects South Africa could soon be signing a deal with a private company to park a handful of dirty power ships in or alongside certain strategic ports. 

The deal will reportedly have a base cost of close to R20 billion per annum over 20 years, with damaging inflation-, commodity- and currency-linked escalations built in. This solution might be cleaner than some of our coal-fired stations; but this minor win will be offset with damage to ocean ecosystems and, of course, the country’s bank balance. The final insult is that after sinking billions into the transaction, the South African taxpayer will be left with no infrastructure and only an oily mooring where the ships once floated. That, dear reader, is the ultimate lunacy of solving a dirty power crisis, with dirty power.

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