Ramaphosa speaks openly about South Africa’s limited energy supply

For over a decade, South Africans have had to contend with the effects of constrained energy supply, acknowledged President Cyril Ramaphosa while delivering the 2020 State of the Nation Address (SONA).

The President said: “I have spoken extensively about the critical role that Eskom plays in the economy of our country and in the livelihood of every South African. The loadshedding of the last few months has had a debilitating effect on our country.”

Ramaphosa highlighted that loadshedding is the inevitable consequence of Eskom’s inability over many years – due to debt, lack of capacity and state capture – to service its power plants.

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“The reality that we will need to accept is that in order for Eskom to undertake the fundamental maintenance necessary to improve the reliability of supply, loadshedding will remain a possibility for the immediate future,” he said.

Ramaphosa then urged Eskom to carry out loadshedding in a predictable manner in order to minimise disruption and the cost to firms and household.

Changing the trajectory of energy generation

President Ramaphosa stated that while Eskom will continue to restore its operational capabilities, the government will be implementing measures that will fundamentally change the trajectory of energy generation in South Africa.

The following measures will be undertaken to significantly increase generation capacity outside of Eskom:

• A Section 34 Ministerial Determination will be issued to give effect to the Integrated Resource Plan 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydropower, battery storage and coal.
• Government will initiate the procurement of emergency power from projects that can deliver electricity into the grid within 3 to 12 months from approval.
• The National Energy Regulator will continue to register small scale distributed generation for own use of under 1MW, for which no license is required.
• The National Energy Regulator will ensure that all applications by commercial and industrial users to produce electricity for own use above 1MW are processed within the prescribed 120 days.
• Government will open bid window 5 of the renewable energy IPP and work with producers to accelerate the completion of window 4 projects.
• Government will negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants.
• Lastly, government will also put in place measures to enable municipalities in good financial standing to procure their own power from independent power producers.

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Diving Eskom into three

In line with the Roadmap announced last year, Ramaphosa said Eskom has started with the process of divisionalising its three operating activities – generation, transmission and distribution – each of which will have its own board and management structures.

According to the President, the social partners organised under Nedlac have been meeting over the last two weeks to agree on the principles of a social compact on electricity.

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He said: “This is a historic and unprecedented development since it demonstrates the commitment of all social partners to take the necessary actions and make the necessary sacrifices to secure our energy needs.

“Through this compact, the social partners seek an efficient, productive and fit-for-purpose Eskom that generates electricity at affordable prices for communities and industries. This requires both a drastic reduction in costs – including a review of irregular contracts – and measures to mobilise resources that will reduce Eskom’s debt and inject fresh capital where needed.”

Ramaphosa also noted the social partners including trade unions, business, community and government, are committed to mobilising funding to address Eskom’s financial crisis in a financially sustainable manner.

He assured that they will do this in a manner that does not put workers’ pensions at risk and that does not compromise the integrity of the financial system.