Trade unions, the pro-nuclear lobby, discredited former Eskom staff and the Zuma fight-back brigade have joined forces to campaign against independent power producers (IPPs), which they claim are responsible for Eskom’s financial crisis.
The anti-IPP campaign is the new anti-Ramaphosa proxy battle, and it has complicated and poisoned the environment at Eskom, where the government, management and trade unions must attempt over the next month to strike a bargain over Eskom’s restructuring.
The restructuring into three separate state-owned businesses involving a generation company, which will own the power plants; a distribution company which will own the poles and wires; and a transmission business, which will own and manage the national grid, is a critical part of the government’s strategy to defuse the financial and operational risk posed by Eskom to the economy.
The campaign forced a response from energy minister Jeff Radebe on Sunday, who issued a lengthy statement refuting the central claim that IPPs cost Eskom money as being “without foundation, misleading and false”.
“Since 2013, Eskom has not incurred a cent in buying electricity from the IPPs which they have not been able to recover through tariff allowance,” said Radebe.
IPPs, which are the first private companies to enter SA’s electricity generation market, came out of a government and ANC policy decision to slowly shift the energy mix to include renewable energy. In terms of the programme, bidders negotiated directly with the department of energy, which then instructed Eskom to sign power purchase agreements with the successful bidders.
It is this two-stage process, where Eskom is obliged to implement what the government has negotiated, that has become the sticking point of the programme’s opponents.
The key players in the anti-IPP campaign are literally in the same WhatsApp group named “Talking IRP and IPPs”. The group is thick with conspiracy theories about the links between IPPs and President Cyril Ramaphosa, whose brother-in-law Patrice Motsepe is involved in the renewable sector through his company African Rainbow Energy and Power (Arep). The group claims that the programme advances the agenda of white monopoly capital and marginalises black people.
By far the most active and vitriolic in the group is Zak Madela, the South African business development manager of Russian state nuclear operator Rosatom. Madela has advocated the violent removal of Pravin Gordhan, who he describes as “a rat” and “a DA member in ANC clothing”.
Madela and Rosatom, which says that it sees “green energy as its future” and has entered the renewable market globally, both say that Madela’s comments on the group were made in his private capacity.
Adil Nchabeleng, president of lobby group Transform RSA, which has supported former president Jacob Zuma at his court appearances and campaigned against his recall by the ANC, is the second-most prolific contributor. Nchabeleng insists his group, which is unashamedly Africanist, is not Zuma aligned and that he is unfairly tarnished with the Zuma brush because he is an independent thinker.
Both Madela and Nchabeleng say they do not oppose renewable energy. But both say they object to how the deals were struck between IPPs and Eskom and the fact that the power utility was given no choice in the matter.
Another leading member is former Eskom head of generation Matshela Koko, who the parliamentary inquiry into Eskom has said should be criminally investigated. Koko can be credited with having started the anti-IPP campaign. While still at Eskom, Koko refused to sign the last round of power purchase agreements between the IPPs and Eskom and is by far the most active commentator on Twitter on IPPs. He has written and spoken extensively about the programme in the media.
Others participants on the group include the deputy CEO of Rosatom’s SA office Ryan Collyer; the head of the National Union of Metalworkers of SA (Numsa) Investment Company Khandani Msibi; pro-nuclear energy academic Anthonie Cilliers; and independent economic consultant Rob Jeffrey.
Another pro-Zuma remnant campaigning against IPPs is Phaphane Phasha, once an office bearer of the Progressive Professionals Forum started by Mzwanele Manyi and a campaigner to prove the Gupta family’s innocence of corruption. Phasha last week lodged a complaint against the IPPs with the public protector on the grounds that Eskom was “forced” to contract them under pressure from political principals.
Black First Land First and the EFF are also active anti-IPP campaigners.
The various groups are joined by Numsa and its general secretary Irvin Jim and the National Union of Mineworkers. (NUM) A branch of the National Education and Health Workers Union at the Nuclear Energy Corporation of SA, has also marched against IPPs in support of the nuclear lobby.
Numsa and Transform RSA in 2018 unsuccessfully attempted to interdict Eskom from signing the latest round of power purchase agreements. Now, the two parties are informally supporting a separate application to be heard in March by a group called the Coal Transporters Forum, coal truckers for Eskom who benefited from the Koko-era, also to have the IPP contracts declared illegal.
While the rhetoric of the various groups relies on stirring up emotions using conspiracy theories that the secret agenda behind IPPs is to enable friends and allies of Ramaphosa to grab an even bigger slice of the economy, there are also some cogent arguments.
The most important of these as put forward by Koko, Nchabeleng and Madela are that IPPs have cannibalised the sales of Eskom. As Eskom is compelled to buy IPP power at an agreed upon rate whenever it is fed into the grid — around 10% of capacity assuming it is all supplied — when Eskom has excess capacity supplied to the grid it does not sell all of the energy it generates itself.
But this argument though only holds true when there is excess supply, a luxury SA no longer enjoys and, given capacity constraints, is unlikely to experience again for several years.
Also valid, is the complaint against the high cost — R2,22/kWh — that Eskom pays for energy supplied by IPPs, significantly more expensive than Eskom’s average cost of coal power at R0,65/kWh.
The high price is due to the fact that when the first two rounds of the IPP programme were negotiated, wind and solar technology were much more expensive than they are now. Prices are now well below what it will cost Eskom to produce energy at a new coal plant, with solar at R0,96/kWh and wind at R0.76/kWh.
This is why Gordhan two weeks ago suggested renegotiating IPP contracts from the first two rounds, a suggestion which has since been back-pedalled on by Radebe, out of concern it would cause uncertainty among investors.
But the biggest argument of the anti-IPP brigade which is pumped out on social media and to the public — that IPPs are responsible for Eskom’s financial crisis — is a wild exaggeration. As Radebe and countless Eskom executives, directors and commentators point out, the power utility has been crippled by R400bn of debt, arising from its huge and poorly executed capital expansion programme at Medupi and Kusile.
Despite the volume of the propaganda pumping out on IPPs, few of the campaign’s main proponents say they oppose renewable energy itself.
Madela and Nchabaleng object only to the form of the programme, they say, and the alleged machinations of Gordhan, who they say cannot be trusted. Jim says that he objects to “the rush” to restructure Eskom and move forward on the energy transition, which he suspects is nothing more than a grab at the assets of Eskom, by a new group of state capturers.
The consequence is that negotiations on the new form of Eskom will take place in an atmosphere thick with mistrust and conspiracy. It will be difficult for rational arguments to prevail here.
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