Mineral resources and energy minister Gwede Mantashe insists that electricity generation will remain largely in government hands for the foreseeable future amid calls for ailing state power utility Eskom to be privatised to ease the deepening energy crisis.
Mantashe said previously that overreliance on the private sector would be a mistake. He suggested the establishment of another state entity to compete with Eskom and boost energy supply.
But ratings agencies, which have flagged the energy crisis as a major economic threat, are sceptical of government intervention. S&P Global Ratings suggested previously that privatisation may be the best option to ease the electricity crisis that has been a constant feature since 2008 as Eskom, which supplies almost all of SA’s power and relies on government bailouts to keep operating, struggles to maintain old facilities and meet demand.
Opposition parties have been calling for more private-sector participation, particularly given the government’s poor track record in overseeing state companies.
In a written reply to an EFF question published in parliament on Thursday, Mantashe said that while independent power producers have a role to play in energy supply, the main responsibility still lies with the state.
EFF MP Phiwaba Madokwe had asked Mantashe whether he has found that the reliance on independent power producers and opening bids “is the government’s way of shifting some of its responsibilities to service providers and the private sector and thus dismantling the republic’s sovereignty?”
Mantashe said: “Through the national power utility, electricity generation largely remains, and will remain for the foreseeable future, in the hands of government. Therefore, the government is not shifting some of its responsibilities to services providers and the private sector in a manner that dismantles the republic’s sovereignty.”
He said, however, that to trade competitively in the global market SA needs to keep pace with global developments such as liberalisation of the electricity market, “without compromising its developmental imperatives”.
“In response to this global trend of market liberalisation, government is facilitating, through a regulated procurement programme, carefully managed participation of independent power producers in the electricity generation space.”
In the debate on just energy transition in parliament on Thursday, Mantashe said the state this week signed power purchase agreements with three projects under Bid Window 5, which will add 364 megawatts to the national grid once completed. The state intends to sign similar deals with 13 preferred bidders under this window before the end of November, he said.
SA Independent Power Producers Association chair Thomas Garner told Business Day it is well known that private entities are better managed and more efficient than state owned entities, “and that is the way forward”.
“Electricity is a national good; the principle of a national good being managed by a state-owned entity is a question of political opinion ... that we do not have enough electricity is a national disaster, [with a] massive impact on GDP growth ... the private sector is well positioned to support government in generating electricity,” Garner said. It is encouraging that government is removing red tape and ensuring that more electricity is generated by private entities as it looks to diversify supply.
The state has been under pressure to open up the energy sector to admit more players to the market, particularly renewable energy producers, to boost power supply needed desperately to fire up the economy as Eskom struggles to keep the lights on.
SA, France and Germany signed loan agreements this week for the two European countries to each extend €300m concessional financing (about R10bn in total) to SA to support the country’s efforts to reduce its reliance on coal in the energy sector.
But Mantashe, a former miner and union leader, has often said renewables alone will not solve SA’s energy crisis, pointing to Europe’s pivot back to the use of fossil fuels as evidence of the constraints of using green energy.
Solar and wind plants could be used to supplement coal, gas and nuclear power generation, but had limitations when it came to meeting SA’s needs, such as supplying mines, Mantashe told Bloomberg this year.
During Thursday’s debate in parliament, Mantashe said SA ought to guarantee baseload energy supply through a combination of gas, nuclear, coal, and hydro. “A pendulum swing from coal powered energy generation to renewable energy does not guarantee baseload stability. It will sink the country into a baseload crisis,” he said. SA’s renewable energy transition push shouldn’t come at the expense of coal mining communities, he said.
“Our country is endowed with this critical mineral [coal] and other fossil fuels which must be exploited for the benefit of the people of SA. This should not be misconstrued as undermining our commitments to the global decarbonisation agenda, as a signatory to the Paris Agreement,” said Mantashe.
With Bloomberg
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