GWEDE, THE PAPER TIGER
In transferring Mantashe’s energy procurement powers to Kgosientsho Ramokgopa, Ramaphosa has neutralised the fossil-fuel recalcitrant
President Cyril Ramaphosa has once again shown his preference for giving his political opponents a long rope to hang themselves. This time it’s his erstwhile ally, mineral resources & energy minister Gwede Mantashe, dangling at the end of it.
South Africans are no doubt frustrated with Ramaphosa’s penchant for the long game, but that’s his way and it is unlikely to change any time soon.
While analysts have been divided on the powers Ramaphosa has conferred on electricity minister Kgosientsho Ramokgopa, he has achieved a key feat: Ramokgopa now determines new generation capacity. In effect, that means it is the electricity minister who decides the pace at which the energy market will be liberalised, and not the stubbornly foot-dragging Mantashe.
It also removes from Mantashe’s hands the power to determine emergency power procurement, thus neutralising his direct influence over possible powership deals.
The sad tale of how Mantashe has stood in the way of procurement of renewable energy from independent power producers (IPP) and in so doing contributed directly to the detrimental surge in load-shedding South Africa is experiencing is well known.
Ramaphosa last year announced his energy action plan and the creation of a national energy crisis committee, headed by presidency director-general Phindile Baleni, to drive its implementation.
Six months later, in January, the team announced significant though still insufficient progress in dealing with the energy shortage.
The crisis committee was the first iteration of what would become Ramaphosa’s “electricity ministry”; its sole purpose was implementing the energy plan to end load-shedding. By January, it had put in place nine workstreams to deal with the various aspects of the crisis facing Eskom. Workstream 6, for example, was made up of generals and senior intelligence officials focused on ending crime, corruption and sabotage at the power utility.
However, the committee was coming up against resistance from the minister it most needed to be onside Mantashe particularly in procurement of renewable energy.
After the committee’s January update, there was intense speculation about Ramaphosa’s cabinet reshuffle, including rumours that he was considering once again separating the mineral resources and energy ministries, and making a new appointment in Ramokgopa, then the head of infrastructure development in the presidency, in a standalone portfolio.
There was another possibility on the table: assigning two DGs to Mantashe’s department.
In the end, however, Ramaphosa went for an option no-one saw coming. He appointed Ramokgopa minister in the presidency overseeing electricity a temporary position, he was at pains to make clear, with the sole mandate of ending load-shedding. That put Ramokgopa squarely in charge of the crisis committee.
In his announcement of Ramokgopa’s powers on
Friday, Ramaphosa cited section 97 of the constitution, which allows the president by proclamation to transfer legislated responsibilities, power or function from one cabinet minister to another. That allowed him to transfer section 34 (1) of the
Energy Regulation Act to Ramokgopa, as well as some powers laid out in section 34 (2).
This is understood to have been a departure from the initial plan, which was to transfer section 34 in its entirety to Ramokgopa which would have placed Ramokgopa in direct control of all aspects of energy procurement. However, when Mantashe got wind of this plan, he apparently protested loudly to Ramaphosa, complaining that the president was in effect firing him by taking away his powers on the energy front.
So, in true Ramaphosa fashion, there had to be a compromise.
The powers in section 34 (2) remain largely with Mantashe. That means he remains in charge of the “process” of procuring new generation capacity, which is carried out by the IPP Office. But there is an important rider: he has to work with his cabinet colleague in electricity. Ramokgopa’s powers, as they relate to section 34 (2), are those that “may be necessary or incidental to any purpose set out in subsection 1 the subsection wholly transferred to him.
It is a move with huge political ramifications; and it renders Mantashe something of a paper tiger.
Still, things are far from clear-cut. Chris Yelland, energy analyst and MD of EE Business Intelligence, describes Ramokgopa’s powers as confusing and messy.
“My view is that the situation is very unclear ... we need to see how this plays out,” he tells the FM.
Yelland says Mantashe has already made determinations on many IPP projects for the coming years including on the Karpowership deal.
But Ramokgopa has a different view. He told 702 talk show host Clement Manyathela on Tuesday that he is “baffled” by the confusion. In that interview he said the act is explicit: section 34 (1) allows him to make determinations around new generation capacity, where it should be sourced, and how it should be procured.
Once that is done, he said, he’d need to collaborate with Mantashe on the procurement process. He was also clear that Eskom, according to conditions attached to its R254bn support package from the Treasury, isn’t permitted to “enter the space of new generation”.
“So, essentially, you have the liberalisation of that space, you have to open it up to new market players The point is that the new generation is sitting with the minister of electricity,” he told Manyathela. “Once we determine what new generation is, if you say X percentage should come from coal and Y percentage should come from renewables solar, battery, PV, pump storage, nuclear So we determine what the mix is and say to the procuring minister [Mantashe], ‘procure according to the following’.”
At that point, he explained, the IPP Office gets to work, and those projects are connected to the grid, “to the extent that the required grid connection is available”.
What is crucial is that it is Ramokgopa, not Mantashe, who decides exactly what generation capacity needs to be procured. The IPP Office under Mantashe simply has to follow instructions and implement those decisions.
This is particularly significant in terms of emergency power procurement, where Mantashe has shown a preference for a 20-year deal with Turkish company Karpowership.
Ramokgopa is having none of it: he has publicly stated that South Africa doesn’t need to enter a 20-year commitment with any company for emergency power; three years is preferable and five is the upper limit. The FM understands this to tally with the position of Ramaphosa and other senior ANC leaders, including finance minister Enoch Godongwana. They’re only amenable to powerships in the short term, senior ANC leaders tell the FM.
As it is, the Karpowership deal has been held up by further negotiations around details, and debilitating litigation which means it hasn’t yet reached financial close, according to Yelland.
Now, Ramokgopa’s powers allow him to make a new determination for powerships not just Karpowership for a short-term deal that isn’t hindered by the onerous litigation surrounding the 20year contract.
So, the Karpowership deal is still on the table, Ramokgopa told Manyathela, but “not in the form of 20 years. An emergency can’t be 20 years ... We will restart the process; we will renegotiate what’s been out in the market.”
Mantashe’s stubbornness is not a simple thing and it’s not personal. We need to understand that the coal lobby is big in South Africa
The FM understands that despite the “compromise” struck over the energy department’s procurement powers, Mantashe remains unhappy that he has been stripped of his key responsibilities.
Independent analyst Ralph Mathekga explains Mantashe’s attitude as follows: he has a preference for coal and fossil fuels, and is also apparently being pressured by the powerful coal lobby, including labour and politically connected new entrants into the coal mining space.
“Mantashe’s stubbornness is not a simple thing and it’s not personal,” Mathekga says. “We need to understand that the coal lobby is big in South Africa.”
While some are concerned that Mantashe could continue dragging his feet in pushing through reforms, Ramokgopa argues that, with his own powers now in place, there is simply no room for this.
Ramaphosa has also assigned Ramokgopa the task of communicating to the public about the energy crisis, squeezing Mantashe out of that space too
at least in the short term. He has effectively reined in Mantashe without outwardly appearing to do so.
Two years ago, Mantashe declared that Ramaphosa had “twisted his arm” when the president forced him to move on reforms to unleash private sector power projects. In effect, the president has done so once again.
Politically, Ramaphosa appears to be indulging his mineral resources & energy minister. But with Mantashe’s procurement powers signed over to Ramokgopa, the noose around his neck may slowly be tightening.