South Africa will almost certainly experience rounds of short-notice and occasional more severe electricity supply disruptions through at least 2022 as officials at Eskom, the state utility, continue to maintain and upgrade existing infrastructure and source new generation capacity. South Africa relies almost entirely on coal-fired power stations, half of which are past the midlife expectations and are, therefore, prone to breakdown.
South Africa experienced another round of load shedding in late October and early November due to shortfalls in generation, heightened demand, and faults at power station units. Eskom leaders have recently welcomed a decision by several Western states to finance Eskom’s transition from coal to renewable sources of energy; however, project outlines vary between 10 and 15 years, and while an initial batch of renewable sources of power has been sourced, they are unlikely to add much to the grid’s generation capacity over the next 36 months. Once these come online, they are likely to make available an additional 2600 megawatts (MW); however, Eskom requires an additional 4000-6000 MWs to reduce the risk of load shedding significantly.
Eskom’s performance remains critical to the growth of the South African economy. Without new generation capacity, new industry cannot be developed, and growth, a key to overcoming unemployment and poverty, will remain stagnant or continue to decline. These factors play into several overarching issues, including socioeconomic drivers of crime and civil unrest rates. The challenge to stabilize the grid and grow capacity to meet economic targets is likely to take several years. Indeed, much of the 2020s is likely to be dedicated to the task.
Eskom’s Troubled Past
Members of Eskom and the government issued requests as early as the late 1990s for additional resources to expand the utilities power generation capabilities to meet future demand. The issue became particularly acute during the early 2000s when the economy was achieving admirable gains. The requests were ignored and in late 2007-early 2008 came to a head with South Africa’s first significant bout of power outages due to generation shortfalls. President Thabo Mbeki of the ruling African National Congress (ANC) apologized at the time for the delay in responding to the request and new mega power projects were earmarked to double capacity by 2015 at a total cost of ZAR 200 billion.
The two primary projects were the coal-fired Medupi and Kusile power plants. Initially forecast to come online in the mid-2010s, both construction efforts experienced severe cost and time delay overruns. As of 2021, only Medupi has been completed, while Jusile remains 50 percent complete. These cost overruns have compounded an already poor financial situation at Eskom, which has an outstanding debt of approximately ZAR 400 billion.
Past mismanagement at Eskom has added to the company’s woes. Impacted by political intrigue and corruption, Eskom’s board has taken on various guises through the years. With 11 CEO’s since 2007, the most recent appointed in late 2019, and starting work in early 2020, the company has effectively had no solid and decisive leadership or direction. Members of the board had also largely been business-focused and had little to no expertise within the energy sector.
Further complicating matters, corruption within Eskom became embedded through the 2010s. This has now been starkly highlighted by the Zondo Commission on State Capture (2018-present). The commission, established to uncover the capture and looting of the South African economy by the politically connected, has uncovered severe irregularities in procurements, particularly coal, and implicated board members in corrupt dealings, including the now infamous Gupta family. Eskom has also regularly reported hundreds of millions of rands in irregular expenditure.
A New Direction
President Cyril Ramaphosa replaced former President Jacob Zuma (2009-2018) in late 2018 and has sought to turn the ailing utility around. One of the first measures was to appoint CEO Andre De Ruyter and direct that the utility be sub-divided into separate entities so that the recovery could be better managed. The breakup would also meet international best practices, with each division focusing on its revenues and costs, thereby driving efficiency. As of November 2021, these boards have now been created; however, the legal separation will likely take at least a further 12 months to complete.
CEO Andre De Ruyter has been joined by a board comprised of competent individuals, many with related and experience with Eskom, notably COO Jan Oberholzer reappointed in 2018 after serving at Eskom for 25 years up to 2008. The new leadership, only a handful of which served during the bulk of Zuma’s years in office, has attempted to overcome Eskom’s issues with more transparency and a commitment to root out inefficiencies. The recently released system status and outlook briefing on Oct. 25 exemplified the new approach.
De Ruyter has made leadership changes at several power stations and has sought to recover funds overpaid by previous administrators. Civil cases are reportedly ongoing, as are efforts to identify and remove corrupt officials at the utility. Eskom has also identified a skills shortage. De Ruyter has recently admitted that the negligence of staff caused the October 2021 load shedding; he attributed this to a culture inherited during the state capture years under the leadership of former President Jacob Zuma. Hiring competent staff and professionalizing the work pool remain vital objectives.
Additional Concerns
Unions
Unions representing Eskom workers have previously opposed the government’s plans to split up Eskom and have regularly agitated for higher wages. Unions remained concerned that any reforms at the utility could lead to job losses. No significant losses have been forthcoming under De Rutyer’s tenure; however, issues related to wages and employment can lead to strikes by workers at the utility over the near term.
The Weather and Coal Mines
Eskom’s primary fuel source is coal, and during periods of intense rainfall, available coal stocks become increasingly unreliable. Eskom’s primary coal stocks are in the country's north, which has a summer rainfall pattern (November-March). Wet coal is harder to process. Eskom has indicated that it has several weeks’ worth of stock.
Power Stations Under Strain and OCGTs
Eskom’s aging power stations are likely to continue to experience breakdowns. Eskom has also relied on its open-cycle gas turbines (OCGTs) to support its capacity during outages. These are expensive to run due to high diesel costs. Furthermore, the OCGTs are not designed for continuous use and could face their own maintenance issues.
Eskom Customers
Businesses in South Africa are aware of the challenges, and most, if not all, have already incorporated electricity disruption into their basic contingency plans. Diesel generators and uninterrupted power supply (UPS) systems are commonplace in most mid- to large-sized businesses. Companies across the spectrum are also increasingly investing in off-grid power sources, such as solar photovoltaic (PV) systems. Seasoned travelers are aware of the risks and have invested in solar power lights, mobile phone power banks, and mobile apps warning of imminent outages. The issue has, over the years, been ‘normalized’.
For companies and travelers seeking to invest or work/travel in South Africa, there are several top-level steps to consider. Crisis 24 customers should contact us directly for further assistance.
Businesses
- Develop or review your Business Continuity Plan (BCP) sections regarding utility outages.
- Identify critical business functions that require a power supply.
- Invest in generators and, if applicable, uninterrupted power supply units to ensure seamless continuity of operations.
Travelers
- Power laptops, tablets, mobile phones, and other business or travel-critical appliances regularly.
- Invest in a backup power supply, and regularly charge this device.
- Download available warning apps covering planned or unplanned power outages and monitor announcements from the utility https://twitter.com/Eskom_SA.
- Plan for business disruptions and travel delays due to traffic congestion during periods of load shedding.
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