LOAD-SHED­DING: AN AVOID­ABLE DE­BA­CLE

Financial Mail - - EDITORIALS -

ne step for­ward, three steps back. That seems to be SA’S ge­netic pre­dis­po­si­tion. Just as the econ­omy jumps out of a self-in­flicted re­ces­sion, Eskom in­ter­venes with power ra­tioning, which can only pro­pel it one way: back into re­ces­sion.

A mod­ern econ­omy re­lies on elec­tric­ity to thrive, so un­less Eskom can meet de­mand, con­fi­dence will sag and in­vest­ment dry up. But as with the re­ces­sion, this bout of load-shed­ding, like those in the past, was en­tirely avoid­able. The util­ity’s pre­vi­ous and cur­rent lead­er­ship, as well as the gov­ern­ment, have to ac­cept the blame. It is trite to say that Eskom was deeply harmed by Ja­cob Zuma and his lack­eys Lynne Brown and Malusi Gi­gaba. But let’s look at the present.

The FM has ar­gued for some time that Eskom will need an­other bailout of at least R50bn. It is now start­ing to look more like R100bn is needed. Re­al­is­ti­cally, Eskom must buy back about

R200bn of its debt (now a breath­tak­ing R419bn) just to re­turn to a fi­nan­cially vi­able po­si­tion.

On the ground, CEO Phaka­mani Hadebe’s new man­age­ment is in­ex­pe­ri­enced and lacks the tech­ni­cal ca­pac­ity to deal with such a com­plex en­gi­neer­ing beast. But, as pub­lic en­ter­prises min­is­ter Pravin Gord­han said last week: “We have to work with what we have.”

Hadebe’s team has re­peated the mis­take of eight years ago, when Eskom de­ferred rou­tine main­te­nance to save cash that it could use to ser­vice its debt. Back then, it was the gov­ern­ment (and Gi­gaba as the min­is­ter) who in­sisted Eskom de­fer main­te­nance to keep the lights on.

That time, pol­i­tics tri­umphed over en­gi­neer­ing sense; this time, the bankers and accountants pre­vailed over the en­gi­neers. So the avail­able cap­i­tal was al­lo­cated to ser­vice debt, which is

Onow cost­ing north of R45bn a year. Yet Eskom only gen­er­ates R52bn cash from op­er­a­tions. The prob­lem is there are not enough tech­ni­cally ex­pe­ri­enced or qual­i­fied peo­ple on the board to fore­see the dan­ger this choice would present. And the fact that Eskom has re­cently brought new gen­er­at­ing ca­pac­ity onto the grid would have lulled many into a false sense of se­cu­rity. After all, since 2015 more than 4,000MW of gen­er­at­ing ca­pac­ity has been added thanks to the In­gula pumped stor­age scheme in the Drak­ens­berg and the Medupi and Kusile coal-fired sta­tions.

So far this year, Eskom has gen­er­ated 193,333 gi­gawatt hours (GWH) of power, which is slightly ahead of last year’s fig­ure at the same stage. For the whole of last year, Eskom pro­duced 229,342GWH — the same as in 2009.

In a nut­shell, the util­ity is pro­duc­ing the same amount of elec­tric­ity it pro­duced a decade ago. Back then, its in­stalled gen­er­a­tion ca­pac­ity was 40,000MW. While that ca­pac­ity has grown to 47,000MW, Eskom is only able to sup­ply 29,000MW, be­cause its power plants are of­ten bro­ken or in need of main­te­nance.

The good news is that this can be changed with a re­lent­less fo­cus on main­te­nance, par­tic­u­larly dur­ing the low-de­mand sea­son to March.

But if this is not at­tended to ur­gently, Eskom will take the econ­omy down with it.

The util­ity needs a vi­able long-term plan to stop its habit of lurch­ing from cri­sis to cri­sis.

But more has to be done. The board needs to be strength­ened by the ap­point­ment of two elec­tric­ity pro­duc­tion ex­perts, prefer­ably from the de­vel­oped world. The in­clu­sion in the board of elec­tric­ity ex­perts from Europe, North Amer­ica and Asia was halted in 2009.

Eskom’s gov­er­nance has largely been fixed with the new board. Now we need fi­nan­cial sta­bil­ity — and the stakes have never been higher.

Sube­d­i­tors: Dave Lan­dau (Chief), Magdel du Preez (Deputy),

Dynette du Preez.

Proof­reader: Nor­man Baines.

Art di­rec­tor: Deb­bie van Heer­den. Con­tracted artists: Colleen Wil­son, Vuyo Singiswa, Sylvia Mcke­own. Graph­ics & statis­tics: Shaun Uthum. Pho­tog­ra­pher: Freddy Mavunda. Ed­i­to­rial as­sis­tant: Onica Buthelezi. Of­fice as­sis­tant: Nel­son Dh­lamini.

123Rf/alek­sandr Elesin

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