The SA government is looking at setting up a new electricity generation business outside Eskom, which could potentially use gas, says mineral resources & energy minister Gwede Mantashe.
He also announced at the Investing in African Mining Indaba in Cape Town on Monday that there were no restrictions on companies producing power for internal use.
He said the proposal around the new electricity company, which could be state owned or a public-private partnership, had been accepted in principle by the government and it now needed a regulatory framework.
Good news from Mantashe was that companies, like those in the mining industry, which wanted to generate their own electricity for internal use, faced no restrictions and could produce as much as they liked.
Businesses in SA have repeatedly told the government that the economy is facing a crisis due to the unreliable nature of electricity supply from state-owned power monopoly Eskom and the high prices its charges, with tariffs increasing more than sixfold since 2006 for large industrial users.
There was an urgent need for power production outside Eskom, which is decommissioning three coal-fired power plants in the next four years, taking 11GW out of the system, Mantashe said.
Eskom’s transmission business would become an important player in the setting up of a competitive national electricity market, much like the Dutch model, where users could buy power from any supplier, using Eskom’s transmission lines to get it wherever it was needed, he said.
The setting up of the power producer outside Eskom needed to be expedited, with the participation of the private sector dependent on investor appetite, he said.
“If we do not do that, we will see more blackouts as we decommission three power plants,” said Mantashe, adding the plants would be closed around 2024.
“We think quicker rather than later. If investors are interested ... we will not stop them,” he said.
Minerals Council SA CEO Roger Baxter said Mantashe’s comments were a welcome admission that there was a crisis that needed an urgent resolution, but he pointed out the unlimited power production commitment and the extra generation unit ideas were vague and needed to be fleshed out with tangible action.
“We are greatly relieved that the government has accepted the principle of private, self-generated, own-use electricity,” Baxter said.
“Any other sources of power are interesting, but we have 138 large state-owned companies that can interfere with the economy. There are 138 good reasons why the government shouldn’t be involved in business,” he said.
SA’s parastatals are in a state of disarray after years of mismanagement and corruption that have pushed them to the edge of bankruptcy and needing large bailouts from the government.
The most pressing example is SAA, which has been propped up with R25bn of taxpayers’ money and remains in a parlous state, cancelling flights and selling aircraft. Eskom is another, with R450bn of debt that it can barely service, let alone pay operating costs.
Pushed for more details on the second generation unit, Jacob Mbele, the deputy director-general in the department of minerals & energy in charge of energy programmes, said: “It’s just a concept.”
The department would not allow a “free for all” in the energy market amid a clamour for the state to expedite private power generation, he said.
The department had forwarded applications from companies like Sibanye-Stillwater, Anglo American Platinum and Gold Fields for their own solar electricity projects to the National Energy Regulator of SA (Nersa), he said.
The Minerals Council SA has said its members have more than 1,500MW of projects waiting for approval to embark on a construction project that would add additional power within three years.
Companies wanting to generate power for their own use could build projects as large as they liked, said Mantashe, adding the restriction came in when companies wanted to send power off-site, using the Eskom transmission network.
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