After listening to President Cyril Ramaphosa’s conversation with journalists about the ANC’s national executive (NEC) meeting at the weekend and a briefing from its economic transformation committee (ETC) it became clear that the party still does not have a plan for the country’s worst economic crisis since 1994 less than a year before the national elections. The committee had nothing to say about it.
Ramaphosa referred to structural reforms, which will add little to investment over the next three years. The planned investment by independent power producers (IPPs) is R14.7bn. Since 2022 the national energy regulator has registered embedded generation facilities with a capacity of 4,600MW. That is equivalent to investment of about R90bn. Investment of only R35bn a year in a R7-trillion economy is spare change. But since half of this “investment” will create jobs in other countries, mostly China, the effect on the domestic economy will be limited.
The ANC belatedly realised that there is a crisis in Eskom’s transmission division that will require investment of up to R250bn, Ramaphosa said. Without investment, IPPs cannot connect to the grid. This provides more evidence that the government must take over Eskom’s entire debt to provide it with a financial runway to make these investments. The Treasury has provided debt relief of R168bn, equivalent to 40% of Eskom’s R423bn debt. The rest of the R254bn relief will be used to pay interest.
The ANC celebrated the increase in the energy availability factor (EAF) and the decline in the intensity of power blackouts. However, the EAF usually increases during winter months as Eskom reduces planned maintenance. The EAF of 58% last week is far lower than the peaks of 70% and 64% during 2021 and 2022, respectively. After each winter peak, there was a sharp downhill trend for the rest of the year — to 55% in 2021 and less than 50% in 2022. There will be a similar trend for the rest of 2023 unless there is a dramatic improvement in Eskom’s plant performance.
The increase in the EAF is not due to a sustained improvement in plant performance. The Eskom board instructed generation to reduce maintenance from May to July. From the week starting on April 3 to the week starting on July 3, there was an increase of 7.6 percentage points (3,600MW) in the EAF to 58.8%. But 82% of this increase was because of a 6.2 percentage points decline in planned maintenance to 9.63%. Breakdowns declined by 1.17 percentage points during the three-month period. Also, demand has been about 2,000MW lower than Eskom’s forecast of 34,000MW during the winter months. Therefore, capacity last week was about 5,600MW higher than this scenario.
During April and May there was a sharp decline in planned maintenance to 5.1% from 15.8%. But Eskom used the period of low demand and lower breakdowns in recent weeks to increase planned maintenance to 9.6%. Breakdowns soared to a high of 38.7% (18,387MW) during the week that started on May 8. But there has since been a sharp decline to 31.1% (14,766MW) last week. Since the lower rate of breakdowns only started during the second week of June, it is still too early to tell whether there has been a sustained improvement in Eskom’s plant performance. According to the plan, 3,180MW — units at Kusile and Koeberg — will be back online by the end of 2023.
The situation could improve, but there must be a sustained improvement in the performance of all Eskom plants for the power blackouts to end. Under this scenario, the economy will only return to the prepandemic trend of low GDP growth. Ramaphosa said there is a need to innovate to finance the grid investments. But he refuses to innovate to tap SA Inc’s vast public sector balance sheet and use the levers of macroeconomic policy to achieve an economic recovery.
• Gqubule is research associate at the Social Policy Initiative.
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