As part of the National Treasury’s R247bn bailout of Eskom, finance minister Enoch Godongwana attached strict conditions. Among them was the obvious stuff, such as a freeze on new debt, a freeze on pay hikes and the unbundling of the entity.
The most interesting condition demanded that Eskom seek an independent assessment of the state of 15 of its coal-powered power stations.
Godongwana was crisp and clear on this: “Eskom is required to implement the operational recommendations emanating from this independent assessment.
“This will include a determination of which plants can be resuscitated to original equipment manufacturers’ standards, following which Eskom must concession all these power stations with clear targets for the electricity availability factor and operations.”
If Eskom has no choice but to implement its recommendations, the report is political dynamite. There can be no ideological debate about whether involving private sector partners is the right thing to do or whether various people in the ANC and its partners like it. The word the minister used was “must”.
So it is of little surprise that the report is stuck somewhere between the Treasury, the cabinet and the presidency — a victim of political pearl-clutching. Treasury director-general Duncan Pieterse promised that it would be released as soon as it arrived. Instead, civil society litigator the Centre for Environmental Rights had to submit a Promotion of Access to Information Act (Paia) request, which has in turn been fobbed off.
Not to put too fine a point on it, if the private sector in the form of international engineering firms is brought in to run these plants, it marks the end of a vast shadow economy worth, according to former CEO André de Ruyter, R1bn a month, feeding off Eskom’s plants, tenders and procurements, its coal supply chain and logistics operations. If that’s your constituency, you have a problem.
Nobody wants to share the report — despite it being clearly in the public interest — so I had to speak to some of the report’s authors, who wished to remain anonymous. The tender document for the consultant is straightforward, and the scope of work focuses on getting clear advice on the ability of the 15 plants to run effectively, or the cost required to get them there, and the skills levels in the plants.
This was duly done. The VGBe Consortium of Steag, RWE-Tech, Vattenfall and KWS eG won the tender. KWS eG did the skills assessment. Steag flew in scores of engineers, including a director, from its Indian operation where it runs big coal plants.
The teams reviewed 15 power stations over a period of three months. What they found will be familiar to anyone who has read reporting on the depths of Eskom’s problems or anyone who has read De Ruyter’s book, Truth to Power.
The authors of the report found that procurement is overly complicated and onerous, that plant directors are disempowered due to a lack of trust at Megawatt Park, and that many processes are therefore centralised, inefficient and slow.
Their work to get the skills audit done was frustrated by some union officials, who are hostile, and some questionnaires were not filled in. Despite that, it’s plain that skills have left the plants in the face of corruption and criminality.
It was established that contract management skills were generally atrocious at plant level. Towns and villages outside the plants, such as at Kriel, Witbank, Volksrust and Vereeniging, are so dilapidated, filthy and rundown that highly skilled engineers don’t want to move their families there, making the skills issue even harder to crack.
The authors note that capex projects will face the threat of the construction mafia, which makes building anything slow, expensive and dangerous. Listed companies will be especially keen to avoid corrupt practices, and skilled people will not want anything to do with it.
Finally, they found that in some communities, where people’s livelihoods depend on existing structures of patronage as well as legitimate Eskom activity, there is alarming hostility to change.
The Treasury was strict on the scope of work. The report’s authors were not asked to make any recommendation on which plants might be suitable for concessions — probably because that is seen as a political topic — but the authors I spoke to told me that with interventions many of the plants have life left in them and that the companies would be happy to run them.
The original version contained recommendations about possible life extensions of certain coal plants, but this was out of scope. The report explains which of the plants are suitable for preparation for running hard — “run to failure” — a riskier approach that would potentially maximise generation in the years up until decommissioning.
If the Treasury gets its way Eskom will now select plants for concession and begin that process, but politically it presents a further problem because the report also contains good data to help design a rational Integrated Resource Plan (IRP). That’s the job of mineral resources & energy minister and all-round coal cheerleader Gwede Mantashe.
He probably won’t welcome the report, because it will say the old coal plants can be fixed (by the private sector) and run hard, efficiently, corruption-free and productively for a few more years before falling over.
That means his IRP must engage with a future beyond coal. Mantashe’s behaviour has suggested that he’d like to see one expensive and corrupt input cost (coal) replaced with another (gas, with Karpower’s 20-year, quarter-trillion-rand contract as an anchor tenant).
We can only speculate as to why he would want to recreate the shambles we’ve seen in coal around another fossil fuel, especially when it will be more expensive to build and too slow to replace the dying coal plants, and would hobble the country to a high-carbon future in a world of carbon border tariffs.
In theory, the Treasury has the whip hand. Godongwana is tough, but the strict conditionality of the bailout lives and dies by the strength of President Cyril Ramaphosa’s support. The delays and discomfort about the VGBe report are worrying, because it suggests the politics hasn’t been smoothed out yet.
Ramaphosa needs to get ironing. There’s half-a-trillion rand of public money on the line that should be building schools, fixing hospitals and uplifting South Africans caught in a spiral of deepening penury. It simply cannot be wasted on continuing to prop up a criminal shadow economy that benefits an elite few.
• Parker is Business Day editor-in-chief.
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