BLSA CEO Letter – 01 August 2022
POSTED ON: August 1, 2022 IN by Admin
The President’s Energy Action Plan announced last week was a significant event. President Cyril Ramaphosa has now thrown everything possible at solving the energy crisis, including opening the way for the private sector to become major generators of electricity. BLSA applauded the effort.
Business must now rise to the challenge. To ensure it does, BLSA and the JSE hosted a session on Friday with leading company CEOs to engage with Eskom CEO André de Ruyter on how business can support the strategy. De Ruyter noted that South Africans need to solve the energy crisis together and that it was important that business and Eskom engaged in a dialogue. Friday’s event was an opportunity to start that.
It was an extremely positive session – business senses the positive alignment of Eskom and government and the new focus on solving the problem. The Eskom CEO reminded us that load shedding has been with us for the last 14 years, that it’s completely unacceptable and that “it’s an indictment upon everybody”. Already at the time of the World Cup in 2010 it was evident that municipal infrastructure was in the process of collapsing. While some IPPs were planned in 2013, Eskom had unfortunately neglected to sign the power purchase agreements. If those IPP projects had been built most of the load shedding today could have been avoided.
There are several ways that business can help resolve the energy crisis. Companies can launch their own embedded generation projects – these can now be bigger than 100MW without need for a licence, so it has never been easier for businesses to build and operate their own power stations. They can also partner with independent power producers, signing the power purchase agreements needed to enable IPPs to get financial close and start construction on new plants.
Businesses can also lease land to IPPs in appropriate areas that are close to grid connection points and have abundant wind or solar resources. Eskom’s current drive to resolve the crisis envisages 10 gigawatts of new power being provided by private sector generators. De Ruyter promised to finalise wheeling arrangements so that IPPs can sell directly to corporate consumers (and municipalities) across the grid.
De Ruyter said that Eskom is a significant landowner and that 30,000 hectares of land would be made available to businesses to set up plants. This is important not just to bring new generation to the grid, but also to ensure those affected are able to sustain their livelihoods. A lot of the land available is in Mpumalanga and as Eskom retires its coal power stations, job creation for those who will be displaced will be important, something that can be achieved by making the land available to private generators.
Business can also support Eskom’s wide-ranging efforts to improve its performance, including the security of infrastructure at risk of vandalism and theft. Sabotage has become an unfortunate challenge facing Eskom and the performance of its fleet. Business Against Crime, a division of BLSA, is active in many fronts of the fight against crime and we will look to ways we can support Eskom in ending cable theft and other damage to property that frustrates the delivery of electricity.
There is going to need to be coordination between businesses – ensuring that various elements of the needed supply chains are aligned. However, we also need to coordinate with Eskom and government. While the intentions are clear, there remain various regulatory impediments standing in the way of swiftly bringing new power onto the grid. Business has promised to examine these and highlight to government what actions are still needed to ensure we can collectively resolve the challenges as quickly as possible.
Friday’s session was brilliantly managed by De Ruyter, who was detailed and articulate in responding to the questions and comments from business. He has risen to the challenge of managing Eskom while working with the many stakeholders that want to see an end to our electricity crisis, doing so with calm focus. His performance added to the growing confidence among business leaders that government and Eskom are on the right path to solving the crisis.
Of course, even if we get everything right, we are still at least two years away from entering a new era of stable electricity supply. It takes time to build new generating capacity, though we can minimise that time if we act fast and in a way that allows the fastest technology builds to take the lead.
I am excited to see business, government and Eskom work together to resolve the challenges we face. The trust is growing, helped by the leadership of the President and the Eskom CEO who emphasised that Eskom is fully aligned with the president’s interventions – the days of Eskom being a monolithic monopoly that tries to protect its market position at all costs are over. De Ruyter added that Eskom fully understands that it needs to open the market to new generation capacity and that the power utility would work with business to make sure this happens. We are on the right track and BLSA will work hard with partners to ensure it takes us to an energy secure future.
The potential for economic growth is a promising aspect of the dramatic liberalisation of the energy sector announced last, I write in Fin24. This is the kind of stimulus measure SA needs as it will help to establish an environment to enable us to end loadshedding. That will happen only around the end of 2024, according to early estimates, and that’s only if reforms run smoothly. That means all aspects of the plan need to be implemented efficiently with no new obstacles thrown up.
Will SA be able to fund a basic income grant on a sustainable basis? From a socio-political perspective there is a strong argument to be made for the implementation of a BIG, but from a fiscal perspective the situation is complex, I write in Business Day. The BIG is just one of several challenges confronting the fiscus. Any choice on the BIG funding front will affect other social wage policy choices such as the NHI and comprehensive social security reform. The only sustainable way to pay for a BIG is to accelerate the country’s economic growth to generate more revenue to allocate to social welfare.
This is a weekly newsletter from BLSA CEO Busi Mavuso.
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
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