Eskom Crisis: While Mr Ramaphosa talks, the DA has a plan of action

14 February 2019

This afternoon, President Cyril Ramaphosa will address Parliament and deliver his response to the debate on the State of the Nation Address (SONA). The President’s response will undoubtedly be overshadowed by our nation’s current energy crisis, demonstrated by stage 4 load shedding across the country over the past days.

The doors to hospitals, businesses, and key industries have been shut due to rolling power cuts by Eskom, with the entity in R400 billion of debt and reportedly having only two months left before being declared bankrupt. The situation is dire, and there is no time for complacency. Like every fundamental challenge our country faces, tinkering at the edges won’t solve the underlying causes. We require complete overhaul and reform.

South Africans are well aware as to why we find ourselves in this mess. For the past decade, the ANC in government has repeatedly put Band-Aids onto the bullet wounds in our energy sector – most notably at Eskom. And the result today is a national power utility that is on its knees, threatening to take the entire country down with it.

What we need now is bold, immediate action to reform the energy sector in South Africa before it’s too late. In this light, the DA proposes the following interventions which are immediately available to the President:

- Reject pressure from the ANC’s union allies opposing the introduction of Independent Power Producers (IPPs). IPPs are producing energy as we speak, and must be allowed to sell power to the grid immediately. Ramaphosa needs to pursue the interests of South Africa, not the interests of his union allies;

- Instruct Eskom to immediately freeze the build on the last two outstanding units at Kusile, and instead look to bring on more IPPs to provide power. Eskom’s debt is spiralling due to cost overruns on the two big coal builds, while the units are not running at full capacity due to design and build flaws.

- Ensure Eskom’s coal procurement policy is immediately changed to allow Eskom to procure coal from any source;

- Reaffirm Eskom’s engineering and maintenance employees as an “essential service” that cannot enter into strike action;

- Immediately review all Eskom’s diesel contracts to ensure the cheapest diesel is sourced from professional and reliable sources; and

- Instruct PetroSA to supply Eskom with diesel at tax-free cost prices to avert a crisis in the short-term.

Over the medium term, the DA would implement the following interventions:

- Privatise the generation entities of Eskom, allowing a diverse range of energy to enter the grid, increasing competition and lowering the cost;

- Commence with a drastic salary restructuring of Eskom’s executive;

- Audit all middle management and begin the process of cutting ‘dead weight’;

- Instruct municipalities to start a “name and shame” campaign for non-payers of electricity. In short, to release the names of the main offenders that are non-paying to the municipality website and local papers making sure communities know who is skipping on payment. This would be similar to the City of Cape Town’s water saving “name and shame” campaign.

- Install major smart meters for municipalities to force municipalities to collect revenue timeously. The top 5 worst municipality offenders at the end of last year were (in millions): Maluti A Phofung, Free State - 2 809; Matjhabeng, Free State - 1 815; Emalahleni, Mpumalanga - 1 667; Ngwathe, Free State - 940; and Emfuleni, Gauteng - 872.

The DA has led the charge on ways to fix Eskom over the last year, with the introduction of the Independent Systems Market Operator (ISMO) Bill or “cheaper electricity bill”. The bill seeks to break Eskom into two separate entities -  a generation and transmission/distribution entity. Our offer would see the generation entity privatized in an effort to break Eskom’s monopoly on production of energy, allowing independent power producers to compete on an equal footing in the generation sector.

With the splitting off of the generation part of Eskom, they could look at selling off power stations to different IPPs. This will reduce the debt component and create competition within the generation sector. The transmission/distribution entity would manage the grid as an independent operator and source power from IPPs and Eskom generation.

Lastly, the bill allows for well-functioning metros to source energy directly from independent energy suppliers.

Where the DA governs, we are way ahead of the rest of the country in terms of renewable energy readiness. 85% of municipalities in the Western Cape already have legislation in place to allow for independent solar energy generation, and most of them are geared to sell clean energy back into the grid.

Just last week, Mayor Herman Mashaba unveiled the R1.2 billion Sebenza Power Station Project in Johannesburg. It is the biggest sub-station in the Southern Hemisphere now stabilising electricity supply to the North Eastern quadrant of the City. This was completed both on time and under-budget. These are the kinds of solutions we should be looking at to make our country more energy secure.

The inconvenient truth is that as Deputy President from 2014, Ramaphosa knew – and was part of – many decisions that have brought South Africa’s energy sector to its knees. As far back as March 2015, he was there and headed up a ‘war room’ to oversee Eskom’s turnaround.

He was there during the board and executive appointments that helped collapse Eskom. He was there as Head of the ANC’s deployment committee from 2012, deploying the likes of allowed Brian Molefe, Anoj Singh and Matshela Koko to Eskom. And he was there as the Chairperson of the Inter-Ministerial Committee on State-Owned Enterprises (SOEs).

As next week’s Budget fast approaches, ratings agencies will be watching the action President Ramaphosa’s government will take with almost R3 trillion in projected national debt. Moody‘s has warned that South Africa’s sovereign rating will be downgraded if State Owned Enterprises (SOEs) like Eskom raise government’s debt burden any higher.

The President has an array of options at his disposal that could end the energy crisis. It is now time for the President to find the political will, stand up to his allies, and do what is best for South Africa.

Issued by Mmusi Maimane, Leader of the Democratic Alliance, 14 February 2019