Eskom’s planned huge upgrade of its transmission grid represents a golden opportunity to reindustrialise SA, create tens of thousands of sustainable jobs and hundreds of small businesses plus new export value chains.
The utility’s Transmission Development Plan (TDP) is expected to cost north of R210bn over 10 years and entail the “stringing” of up to 14,000km of line as well as the installation of 170 transformers, 40 capacitors and more than 50 reactors. It’s going to be a very big undertaking, but it’s an essential one. Without a robust, reliable grid, one that expands the grid’s footprint, we can build as many wind and solar farms as we can shake a stick at — but their electrons simply won’t get to where they’re needed.
SA Inc is ready, able and (for obvious reasons) more than willing to play its part in making the TDP a resounding success, one that delivers the best possible bang for the taxpayers’ buck and that leaves a lasting economic and social legacy.
By “SA Inc” I am referring to steel suppliers, fabricators, electrical and other manufacturers and contractors. In recent years almost everyone in these sectors has been badly affected by lacklustre or non-existent growth, poor investment and, of course, load-shedding. This has resulted in shrinking order books and dwindling employment.
For obvious reasons then, the prospect of an investment on the scale of the TDP has thousands of businesses across the country, big and small, champing at the bit. But those of us who have engaged with Eskom on the plan (the TDP has already been gestating for several years and no-one is quite sure whether it will kick off in earnest in 2023 or 2024) are increasingly concerned about the transmission-build direction that Megawatt Park seems to be going in.
In late June, SA Inc learnt to its surprise that Eskom had issued a request for information (RFI) for transmission towers — a sizeable chunk of the TDP project. The RFI is consequential as it serves to pre-qualify bidders. Miss out on the RFI and some companies will be unable to participate further.
A constant refrain coming out of Eskom whenever the TDP is discussed is that SA suppliers are too expensive, lack capacity and are dominated by monopolies.
It seems these shibboleths have been so long ingrained at Eskom that they are accepted as gospel without anyone considering where they come from, what assumptions inform them or whether they actually hold water. And it seems that they substantially informed the way in which the RFI was issued.
As to cost competitiveness, consider just one significant part of the TDP bill: steel. SA now produces in the region of 4-million to 4.5-million tonnes of primary steel a year. It also imports roughly 1-million tonnes. Every tonne of steel produced locally competes against those imports so it has to be price competitive.
Eskom also likes to point out how much cheaper it has been to do grid extensions in neighbouring countries such as Namibia and Botswana than in SA. Which ignores obvious differences such as differentials in wage rates and the fact that those two countries are blessed with wonderfully flat topography.
Industry has been consistently calling to conduct an assessment and costing exercise on a defined, existing, executed, Eskom transmission project so that concerns and issues can be objectively pinpointed and addressed.
Whenever the TDP is rolled out in earnest, every steel mill in SA wanting to get in on the action will have to compete against domestic and foreign suppliers. Local industry isn’t asking for carte-blanche localisation, it is simply asking to be consulted on further development of the plan.
One small example of why this sort of consultation is important ... SA’s transmission towers were designed in the 1970s and 1980s and Eskom still specifies steel grade S355JR for towers — the same as it did back then. But steelmaking and the quality of steel coming out of our local mills has come on in leaps and bounds in the past 40 or 50 years. Which means that Eskom is still specifying too much, too expensive, steel. The private sector can help fix that, but only if it has a seat at the planning table.
The latest RFI saga (the submission window was extended to July 21 after an outcry) served only to underscore industry’s calls for a seat at the TDP table. It also reinforced the perception that Eskom has little interest in ensuring local content in this huge infrastructural project and that it is hell-bent on appointing foreign engineering, procurement and construction (EPC) contractors at the expense of domestic EPC and other contractors.
On capacity, consider just Highveld Steel’s ability to roll out heavy sections — easily 430,000 tonnes a year. Medium mill sections? Between them, just two suppliers have the capacity to do more than 1.5-million tonnes per annum. That’s much more than the TDP will ever require in any one year.
As to the belief that SA industry is riven with monopolies, it’s true that there has been a concentration in certain Eskom-facing sectors recently but that is almost entirely down to a sheer lack of work. In a shrinking pool, only the toughest fish survive. But open the floodgates, to a decade of sustained demand and, to stretch the watery metaphor, any monopolistic tendencies will soon evaporate.
One example Eskom points to, to make the point that local industry lacks capacity, is the area of large transformers. It is true there is only one local supplier and that it is not in the best health. And so, the argument goes, Eskom has to look east, to China or India. Not just for very large transformers but for all of the required kit.
It is no exaggeration to state that Eskom seems fixated on putting its transmission rebuild business offshore. At the expense of all the local good it could do. What they don’t appear to appreciate is the extent to which foreign contractors have been burnt after previous dealings with the parastatal. Many of them will tell you, frankly, that they’re happy to ship containers to Durban but that they don’t want to put boots on the ground to do the installation, that SA is just too hostile a place in which to do business.
Today Indians are building power grids across the US; the Chinese are doing the same across Africa. But both countries built their capacity on their own home-grown demand. We have, on our doorstep, a continent that is literally dark but hungry for electrification, and increasingly able to pay for it. South Africans should be electrifying Africa. But to do that they need to build their own capacity. The TDP is the golden opportunity to build that capacity.
• Philippa Rodseth is executive director of the Manufacturing Circle. She also chairs the Steel Masterplan Local Demand Implementation Team where industry representatives of the Power Operations and Leadership Association of Southern Africa, the SA Iron and Steel Institute, the Steel and Engineering Industries Federation of Southern Africa and Busa work on a collaborative basis to identify and execute demand opportunities for the industry.
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