[miningmx.com] — IT’S pretty logical: our economy will stagnate without adequate power and reliable, stable electricity.
The electricity crisis that started in 2006 with power shortages in the Western Cape, then paralysed the mining industry in January 2008 and led to Jacob Maroga’s load-shedding system, indicates that Eskom, once one of South Africa’s economic shining lights, is in decline.
To anyone reading between the lines it has long been clear that Eskom lacks the capacity to grow further. The electricity giant matured long ago. The two base-load power stations it intends building, Medupi and Kusile, will probably be its last.
Analysis of the future demand for electricity paints a different picture. Eskom’s current generation capacity of about 40 000 megawatts will need to double by 2030 if South Africa is to maintain an average annual growth rate of 3%.
These are government’s own estimates and to realise them will cost some R1,200bn – but environmental issues and carbon taxes probably make the estimates worthless.
Medupi will supply 4,000 megawatts of this capacity. If Kusile is built, it will produce another 4,000 megawatts or so.
But a big question mark hangs over Kusile – will Eskom be able to raise the necessary finance and will it be a proposition to build another coal-fired power station with carbon levies coming amid environmental concerns.
About 32,000 megawatts will therefore have to come from sources other than Eskom – and, if these are not found, the country cannot grow.
Additional power can come only from the private sector, but the ANC first needs to persuade its alliance partners that private companies can generate and supply electricity just as well as, or even better than, Eskom.
An issue that has so far received little attention is the fact that by 2018 Eskom will have to start switching off some existing power stations, plants that by that time will be so old that they can no longer operate.
In 2012, when Medupi’s first generating units come on line, Eskom’s reserve margin will return to 15% or more. But between 2018 and 2023 it will again drop below 15% following the decommissioning of old power stations like Hendrina and Arnot.
If no new power station projects are established within the next two years, by the end of this decade there will be a repetition of the events of January 2008.
It is therefore critical for Eskom’s affairs to run like clockwork.
Judging from the reports that volatile DA MP Pieter van Dalen last week brandished in front of Vytjie Mentoor, who chairs the parliamentary portfolio committee for public enterprises, the ANC’s task will soon become much easier.
Caught in crossfire
The report leaves little doubt that at Eskom things are in a bad way.
Paul O’Flaherty, who joined Eskom as financial director in February, was caught in a crossfire last week over remarks that Eskom might have to reduce staff. The National Union of Metalworkers (Numsa) and Solidarity crossed swords with O’Flaherty, especially as wage negotiations are under way at Eskom and nothing had been said about labour cuts.
O’Flaherty, who was financial director at Murray & Roberts before being appointed at Eskom, explained his viewpoint to Sake24.
If Eskom is demanding three years of successive 25% tariff hikes from the public, he said, it must ensure that these hikes are used appropriately and that there is no surplus fat in the system. O’Flaherty said he intended to make sure of this.
If Numsa and Solidarity had not known what he was speaking about, Van Dalen’s leaked report hopefully clears matters up.
The report shows that the average salary of an Eskom employee is R37,515 a month, about 35% of the electricity Eskom delivers to households is hijacked and non-payment is an enormous problem in Gauteng, in particular.
That’s of course apart from the electricity that was provided to BHP Billiton’s Mozal smelter in 2009 at 12c per kilowatt hour while the rest of the country was paying 31.2c.
It is to be hoped the pricing problem at Billiton’s smelters will be rectified, but in future the electricity industry will change dramatically. Issues of price and cooperation will be decisive.
The legislative framework for private power producers could have been finalised years ago. Had it been, we would probably not be saddled with the problems that now threaten to engulf us.
Not bad enough?
But the framework can get off the ground faster than people think – as soon as the appropriate empowerment players are ready for it.
By the way, Canada’s CIC Energy – which has been waiting for two years to conclude an electricity agreement with South Africa so that it can begin to build a coal-fired power station in the Mmamabula coalfield in Botswana – last week gained a partner.
This was none other than Robert Gumede, founder of the Gijima Group of companies, who is in information technology and a friend of President Jacob Zuma. With a single cheque Gumede contributed R10m to last year’s ANC election campaign.
In recent weeks he has also been in hot water because of default on a R3.9bn contract with the embattled Department of Home Affairs.
Why take on such a partner if you want to build a power station? Are things not bad enough?
– Sake24.com
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