The fingerprints of South Africa’s power utility are all over the economy’s demise. But fixing Eskom is giving President Cyril Ramaphosa a chance to switch course on issues from climate change to growth.
“It’s really important to link Eskom’s restructuring to where we want to be as a country,” said Roger Jardine, the chairman of FirstRand, Africa’s largest bank by market value. “It has to happen as soon as possible.”
The utility has lost its 10th chief executive officer in as many years, relies on bailouts to fund operations and interest payments, and, can’t keep ageing coal plants running, contributing to the biggest economic contraction in a decade in the first quarter. Despite Eskom having too many workers, labour unions oppose Ramaphosa’s plan to split the company into three, while no visible progress has been made on reorganising its liabilities.
“Dealing with that debt has to be accompanied by a strong operational plan,” Jardine said, adding restructuring the utility can also help lead a transition from coal, which provides about 90% of South Africa’s power.
Revitalising the push away from coal is an opportunity “to reset the clock” and attract private investors to help increase electricity capacity, the chairman said.
One of the world’s most successful renewable-power programs — which drew more than R200 billion ($13 billion) in investments since starting in 2011 — stalled for about three years as ex-President Jacob Zuma and former Eskom officials pushed for nuclear energy before his 2018 ousting. The government is also no closer to completing an energy blueprint that has been years in the making.
Not only do banks stutter when the economy does, globally they’re also under pressure over climate-change funding, and South Africa is no different. Standard Bank shareholders last week voting in favour of a proposal for Africa’s biggest lender by assets to disclose its coal-financing policies.
“We have coal in our lending portfolio and over time we will look at how we divest from that,” said Jardine, whose company owns investment bank Rand Merchant Bank and consumer lender First National Bank.
Nedbank has said it will no longer fund new coal-fired power plants, which led to remarks from the ruling African National Congress’s economic policy head, Enoch Godongwana, that banks may be forced to lend to the industry.
“For anyone to say ‘if banks won’t fund coal we will force them to’ is not sensible,” Jardine said. “For anyone to say ‘we won’t fund coal tomorrow’ is also not sensible because there is a whole ecosystem here that has to be carefully migrated.”
Absa aims to develop a policy on coal funding by researching the 12 African markets it operates in, said Chairwoman Wendy Lucas-Bull.
“Each country is in a different stage of dealing with it,” she said, “and it will have different implications in terms of development.”