Electricity: Crisis? What Crisis?

Typical political spin. How can I tell? The new CEO of Eskom had barely put his feet under the desk and the denials commence yet again. What would the typical response of the new appointee in the private sector? In order to ensure that the sins of his predecessors are not borne by himself, he will perform a rigorous, if not over-diligent abd exhaustive cleaning of the Augean Stables. What is the politician’s instinct? A cover-up!

“Crisis? What Crisis?” was an iconic album by Supertramp in the 1970s. The cover of the Album shows a member of the band in a bathing costume reclining in a deck chair as if he was on Brighton Beach in mid-summer sunning himself. So far so good except that littered all around him are scenes of devastation.

Doesn’t that sketch portray what is happening at Eskom today?

 

Eskom overheating

Eskom overheating

Eskom epitomises everything that is wrong with the ANC Administration today: inept, venal and self-serving. These are all the defining characteristics of Eskom as well. While the Executives pat one another on the back and award themselves Performance Bonuses of R23 million. They also squander R43 million on breakfasts with the Gupta’s, the Zuma’s favourite uncle, to parody a famous advert by Joshua Doore’s.

This national crisis – let us not use any euphemisms in this debacle – must be laid squarely at the door of the ANC commencing with Mbeki. Established in 1923 to provide electricity to South Africa. Eskom was run efficiently for 70 years. In order to cater for all eventualities, a generous margin in generating capacity of greater than 20% was allowed for. Whatever unforeseen circumstances could affect Eskom such as an unplanned shutdown would never result in power outages or load-shedding for consumers.

Eskom#1

The lights of South Africa are not working because Eskom is dysfunctional which is a euphemism for broken

 

This blissful state would prevail until the ANC arrived on the scene. It was Mbeki who in typical ANC fashion prevaricated as to Eskom’s future. Instead of a clear direction which was required in an industry where lead times on the construction of new power stations are a decade, indecisiveness reigned.

 

Tshediso Matona, the newly appointed CEO of Eskom

Tshediso Matona, the newly appinted CEO of Eskom

Firstly let us investigate the capability of the man who should be instrumental in turning Eskom’s fortunes around, Mr Tshediso Matona. An article on the new incumbent in recent M&G was entitled “New Eskom CEO Matona is ‘weak’, say ex-colleagues”

 Former parastatal senior executives fear that newly appointed Eskom chief executive Tshediso Matona is “weak”, and predict he will struggle to assert his authority at the troubled electricity utility.

 Their concerns suggest Matona may be a yes man who will do what he is told, rather than someone who can chart a bold new course at Eskom. 

Those comments certainly do not fill me with any form of confidence. Instead of a political yes-man what is required in these dire circumstances is a street fighter who has not to wield the axe. This is not a time for a Mr Nice Guy who will toady to the political lackeys at Luthuli House.

Medupi Power Plant

Medupi Power Plant

 

Secondly by not having a business background, he is deficient in two key understandings. Firstly the direct impacts: these comprise not only lost productivity but defective product which has to be scrapped. In a production process which requires a continuous process, production may not be halted otherwise product is incorrectly formed. Foodstuffs, chemical & metallurgical processes fall into this category.

In contrast to this and of far greater significance is the imperilling of the confidence factor. No investor will invest vast sums of money in an economy where one of the major input factors is subject to erratic, tenuous and unreliable supply. With unemployment rampant, economic growth is paramount to stave off social unrest and mob rule.

 

Collapsed silo at Majuba Power Station

Collapsed silo at Majuba Power Station

Instead through its ham-handed and limp-wristed response to this crisis, the government has not filled these investors with a great deal of the ephemeral substance called business confidence.

It was not only the delay in the decision to construct two mammoth coal-fired power stations but it was compounded by the significant time and cost overruns. In terms of the original planned commissioning dates, both plants are significantly overbudget in terms of both time and cost.

One of the original complications to allowing IPPs – Independent Power Producers – to produce power for the national grid was their cost estimates. That fact ultimately thwarted the ANC’s appetite for partial privatisation. To South Africa’s chagrin, it is now patently clear that these figures will be handsomely exceeded by Eskom’s eventual costs per Kwhr.

Eskom#3

How ironic!!

The consumer will have to bear these additional costs without demurring. Moreover the current ineptitude and incompetence of the current management is costing South Africans dearly as well.

What was the exact cause of Monday’s blackouts? The maintenance staff at the Majuba Power Station severed one of the power cables.

Why was there insufficient diesel to run the turbines albeit at a substantially greater cost that coal fired stations? Nobody had place an order for additional diesel which had to be sourced overseas.

Ankerlig Open Cycle Gas Turbines

Ankerlig Open Cycle Gas Turbines

Why weren’t the diesel-fired turbines not converted to gas when the possibility existed that with the low reserve margin that they would have to run not on a stand-by basis but on a continual 15 hour basis? None of the expensive executives thought about it!! But enormous bonuses were paid.

Why did the silo at Majuba collapse? Inadequate maintenance!

Why was there inadequate maintenance?

Let me not continue. The verisimilitude between Eskom’s actions and that of an incompetent person is clearly noted.

 

Eskom's capacity versus demand

Eskom’s capacity versus demand

Let us compare Medupi with the Jasper solar power project located in the Northern Cape. According to MyBroadband:

 

Jasper solar power project

Jasper solar power project

The 96 megawatt (MW) photovoltaic (PV) Jasper solar power project came online recently, providing enough electricity to power up to 80,000 households.

The Jasper project is located in a Northern Cape solar park which includes the 75MW Lesedi solar power project which came online in May 2014.

With over 325,000 PV modules, the Jasper Project will deliver 180,000 megawatt-hours of renewable electricity annually for South African residents.

The project also marked Google‘s first renewable energy investment in Africa after the company provided US$12 million in funding.

Jasper solar power project#2

Jasper solar power project details

The Jasper solar power project, developed by SolarReserve, was constructed within a year – two months ahead of schedule.

The project reached financial close in October 2013 and full construction began on site in December 2013. Full commercial operations were achieved a year later in October 2014. It cost approximately R2.9 billion ($260 million) and has created in excess of 800 direct construction jobs.

During the 20+ year operating life (the Jasper project has a 20-year power purchase agreement with Eskom) the project will spend in excess of R2 billion on operations and maintenance costs.

For the life of the project 1.6% of revenues will be re-invested in enterprise development (ED) and socio-economic development (SED) of neighbouring communities.

Jasper solar power project#4

What would be the DA’s solution if they were in power? They key issue would be the non-political awarding of supply contracts to the lowest cost bidder. The other issue which would require addressing is the vertical integration of Eskom. This would require the splitting up of the components in order to allow greater flexibility.

Does the ANC have the capacity, integrity and intellectual ability to grasp the nettle on all these issues? I fervently believe not. Even in the case of the smallest parastatals politics, cronyism and ineptitude precludes the smooth functioning of these entities. All of them have become the trough for the gravy train bottom feeders.

DA's proposal

Will the recent appointment of Cyril Ramaphosa reverse the decline of Eskom? Initially yes but when the spigot of patronage is turned off, the disaffected tenderpreneurs and their ilk will challenge his authority on some spurious grounds.

Cyril beware. This job is not a sinecure but what is known in modern parlance as a hospital pass, the veritable poisoned chalace.

 

Cyril Ramaphosa

Cyril Ramaphosa

You have been set up for failure.

For without the rigorous political support of Churchillian boss – which Jacob clearly is not – you are doomed to fail.

 

Koeberg

Koeberg

And with it, South Africa.

Au revoir

Hambe Kahle

But do not forget to switch off the lights

 

Footnote to all social engineers and politicians:

All of this serves as a painful reminder that politics cannot triumph over economics. The ANC, like the Communist regimes before them, will still rue the day that they wilfully ignored the primacy of economics and its handmaiden competence, in the modern world.


Leave a Comment.

*