Eskom Watch

As Eskom picture becomes darker private sector intervention needed

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Uncertainty about when to believe Eskom's statements and when not, has become a massive problem to the South African business sector and a huge threat to the economy as a whole.

While blackouts, as such are hugely disruptive to the business sector, planning to minimise their impact has now become virtually impossible because statements from Eskom of what to expect has become totally untrustworthy. The general impression is that the electricity utility has lost any semblance of control over the situation.

Last week offered a perfect example of how unreliable guidance on the electricity supply situation from Eskom has become. On Monday Eskom spokesperson Andrew Etzinger said there would be no scheduled power cuts for the week – the system was tight, but no load-shedding was planned.

Two days later, on Wednesday, he said South Africans could have their power cut if “more pressure” is put on the utility’s grid. "We are using our emergency reserves extensively so far this week," he said. By Thursday morning cuts have moved from “phase two” to “phase three.”

By Saturday Etzinger told the SABC “… we hope not to go to stage four as we did in 2008,” but it will be implemented if it is necessary to protect the grid. “This is a controlled process by Eskom to make sure we do not risk a national blackout,” he said.

He also warned that unless they manage the current electricity situation, there is risk of a total blackout which can last for two weeks and would be worse than that experienced in 2008. It will possibly take weeks to re-start the grid after a complete blackout, he said.

The present blackout schedules, in some coastal holiday resort areas or the lunch hour, are already threatening the existence of restaurants and bars, which heavily depend on the increased summer holiday turnover for their survival. For some establishments this period represents more than 50% of their total annual turnover.

The impact of this uncertainty and the general situation surrounding Eskom was also last week illustrated by the released Merchantec CEO Confidence Index. Despite the overall confidence going up by 3.9% in the fourth quarter of this year to 52.1 points, 58% of the surveyed CEOs felt that state-owned power utility Eskom’s shortage of electricity capacity would have a material effect on their businesses in 2015.

The news of Nedbank and Investec’s announcement that they are considering selling their 600 MW privately owned coal-fired Kelvin power station, in Kempton Park also did not help to boost confidence in the electricity supply front. There was no explanation offered as to why they want to sell the power station – posing the question: “is there something they are not telling us?”

But there are always also winners in any adverse situation. Ironically the Merchantec report states: “The remaining 42% (CEOs) are either benefiting from the business opportunity created by Eskom’s lack of capacity or are largely positively affected through the change in consumers’ purchasing patterns due to power outages.”

Therein lies an important lesson: Eskom’s troubles offer an opportunity to increace that percentage of “winners” in the private sector to the advantage of the country as a whole. Government should create the conditions which make it possible for the private sector to become fully involved in the electricity supply chain of the country and to exploit the opportunities to export electricity into Africa.

In this regard the recent statement by ANC secretary-general Gwede Mantashe that the governing party is not in favour of privatising the country's power system, despite problems with Eskom, is exactly the wrong message. His description of electricity as a “public good” testifies to an ideological approach rather than strategic thinking about the way forward.

The governing party will do well to study what happened in the USA and elsewhere in the wake of the “oil crisis” of the 1970s. The opportunities it offered the private sector turned the USA from a country held at ransom by the OPEC-countries into a net exporter of energy products.

by Piet Coetzer

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