President Cyril Ramaphosa announced last week in his State of the Nation Address (Sona) that expanding energy generation capacity is one of the priorities of his administration, as entailed in the Economic Reconstruction and Recovery Plan (ERRP).
Insofar as those in charge of the government are concerned, Eskom is an important economic actor that is subordinate to the state. This means the power utility enjoys a significant amount of protection and will continue to do so for as long as it remains a state-owned enterprise (SOE).
For example, the president emphasises Eskom’s relevance to the ERRP; in other words, it is seen as of strategic importance, thus warranting a restoration of its financial wellbeing. In his Sona, Ramaphosa detailed at length the steps and measures taken to ensure the efficiency and sustainability of the entity.
The next five years
However, he admitted that despite the measures taken (that is, pouring money and resources into Eskom ) load shedding is going to be part of our business, work and social aspect for the foreseeable future.
For in the Sona, Ramaphosa conceded that unless Eskom’s power generating capacity is increased, there will be an electricity supply shortage in the next five years.
While there is no reason to downplay the impact of such a scenario on the economy, the same goes for the labour market, unemployment and inequality.
Not only will electricity supply shortage force companies to restructure their operations, it will also induce unemployment and worsen inequality.
One important question that remains is how can the president stand before the nation and proclaim that Eskom is making “substantial progress with its intensive maintenance and operational excellence programmes to improve the reliability” when load shedding has been a routine occurrence since the beginning of the year?
This raises another question: for how long will the state protect Eskom and other failing SOEs, and can the primacy of politics over the economic reality of that which is shaped by market and market relations continue?
The ANC – one can even say the Tripartite Alliance (the ANC, the Congress of South African Trade Unions and the South African Communist Party) – assumes, at least from an economic nationalist perspective, that it is important for the state to play a significant role in defining the policy that subordinates economic activity to political aspirations.
One great difficulty with this outlook is that the world economy is not waiting for South Africa to sort out its power-generating crisis – companies move on and look to other countries where their operations are not continuously interrupted by power cuts.
Moreover, what new investor would be willing to risk their capital and resources on a country that cannot keep the lights on?
Under reasonable assumptions, it is a truism that power supply is crucial to a country’s economic activity and that power disruptions have an extensive collateral impact, not just on the fiscus but also on the ordinary citizen.
Risk and irony
Eskom, at least the one that was spoken of in the Sona, does not only pose an energy security risk to the country but also dims any chance of economic development that will bear egalitarian fruits for the people.
Ironically, the latter remains an aspiration of a ruling party that is determined to maintain the Eskom fiasco.
I shouldn’t complain, but nothing very hopeful was said in the Sona regarding Eskom.
Do not look to the Eskom Social Compact (ESC) signed by the government and its social partners. Nothing will come of it.
We are a country of lekgotlas, commissions of inquiry and their recommendations, task teams, working groups, committees and commitments.
The ESC is splendid diversion of critical attention and scrutiny on Eskom from the financial and operational catastrophe that is unfolding at the power utility.
To believe otherwise, notwithstanding the optimism the president seems to have about Eskom, is to set our collective hearts up for heartbreak.
A somewhat surprising development concerning the electricity supply shortage is the turn towards wind and solar energy. Someone needs to remind our principal that energy transition can be a slow and drawn-out process that can be a constraint to a country seeking to make a quick transition.
Now, with the Nersa-sanctioned 15% tariff increase, the imprudent and unstable Eskom has the green light to increase the price of electricity.
The burden of the tariff will be borne by ordinary South Africans who cannot afford any increase, many of whom are unemployed or have had to take salary cuts due to the effects of the pandemic. It will not be big energy users in the mining industry that will feel the pinch significantly – it is me and you who are going to be paying the ultimate price.
South Africa could well be on the path to rebuilding its economy in this pandemic era that is our current reality. However, the Eskom crisis one of the major hindrances on that path – a depressing scenario.