This week Eskom commemorates its 100th anniversary, but it does so at a time when there is little to celebrate.
New revelations about rampant crime and corruption at the utility come at a time when SA is suffering from the worst power cuts the country has experienced since 2007 when demand for electricity started exceeding supply.
The deterioration of its ageing coal-fired fleet and failure to add sufficient new generation capacity over time has left the state-owned power utility with a generation shortfall of about 6,000MW. Load-shedding has become part of everyday life for South Africans who have not had one full day of uninterrupted power supply in 2023.
The electricity crisis, which has been escalated to a national state of disaster, has been years in the making. Eskom has warned from as far back as 1998 that the government needed to invest in new generation capacity to cater for increasing demand.
In a letter from April 1999, written to be preserved in a 25-year time capsule that has been opened now for Eskom’s 100-year anniversary, the CEO at the time, Allen Morgan, says generation capacity will be the “next challenge” for the utility. “Since the mid-1980s we have had a surplus of generation capacity that we have managed. We predict that this will have disappeared around 2007,” Morgan wrote.
When SA first experienced load-shedding in 2007 and 2008, to augment supply, Eskom started deferring maintenance and running its power stations at a higher than benchmarked utilisation factors.
By delaying maintenance and as power stations started ageing, unplanned breakdowns became more commonplace, and the energy availability factor (EAF) of Eskom’s fleet started deteriorating.
Both the 2010 and 2013 integrated resource plans refer of this saying, in the 2013 plan: “Since the 2008 electricity supply crisis Eskom was able to meet electricity demand through delaying maintenance on the generation fleet. This has led to the deterioration in the performance of the ageing fleet, worsening the current crisis but also incurring a longer term impact on the effectiveness of the fleet to meet future demand.”
In 2005 the government decided to permit Eskom to build two new power stations, the now infamous Kusile and Medupi.
The plan was for power from these two plants to start coming online from 2011, but after huge budget overruns and many design and construction faults these power stations are still not able to perform to their nameplate capacity of about 4,800MW each.
Reuel Khoza, who was the chair of the Eskom board in 1999, wrote in his letter that was added to the time capsule: “The challenges facing us must surely have been met and overcome by the time you read this — challenges such as crime, poverty, unemployment, illiteracy and disease.”
Over the past three years, as the economy buckled under the strain of the COVID-19 and load-shedding, these challenges have deepened.
Since 1999 unemployment has increased from 23% to 33%, contributing to SA becoming one of the most unequal countries in the world. Since 2011 South Africans have become poorer. GDP per capita rose steadily from 1999 up to 2011 reaching a peak of about $8,700 in 2011. Since then, according to the World Bank, it is decreased to about $7,000.
To arrest the decline in electricity supply government has now launched a two-year plan to end load-shedding. This plan relies on increasing the Eskom fleet’s EAF to 70% by March 2024. But the first target, reaching an EAF of 60% by the end of this month seems increasingly unlikely, according to Eskom.
The success of the plan will also require a turnaround in Eskom’s finances, which deteriorated under the escalating projects costs from Kusile and Medupi, rising municipal arrears and corruption that started siphoning money from the utility during the Gupta-years.
Despite government bailouts of over R200bn since 2009 the utility’s debt has risen, over the last 10 years, from R254bn to R423bn. The Treasury announced a new three-year debt relief plan for Eskom last week that will cover about 60% of its debt.
It has become clear, however, that no amount of maintenance or debt relief will turn things around for Eskom for as long as it continues to suffer from crime, sabotage and corruption at power stations and in its supply chains.
According to André de Ruyter, who was booted out as Eskom CEO last week, a month before he was due to leave the post after he resigned in December, revealed that corruption cost the utility up to R1bn a month.
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