21 October 2019
Dear Fellow South African,
The unexpected load-shedding last week disrupted the lives of millions of people in their homes, workplaces and businesses.
The cost to our economy of power outages is significant. It contributes to investor unease at a time when we are trying to attract more domestic and foreign capital to South Africa and to improve our global rankings on ease of doing business. It is also understandable that South Africans became frustrated and angry.
This latest round of load-shedding makes even clearer the urgency with which we must act to protect our energy supply.
While technicians are working around the clock to fix problems at several power stations and restore the grid to stability, government last week released the updated Integrated Resource Plan (IRP). It is our policy blueprint for the country’s industrial, commercial and household energy needs until 2030. It provides clarity and certainty on a crucial part of our development path.
The plan focuses on affordable electricity, reduced emissions and water consumption and a diversity of generation sources. Significantly, given the events of the last week, the updated IRP takes into account the constraints facing Eskom, and deals with the desire by electricity users to have alternatives to meet their energy requirements.
The IRP supports a diversified energy mix that includes coal, natural gas, renewable energy, battery storage and nuclear power. Because coal remains the dominant energy source for our country, we will be focusing on attracting investment in high efficiency low emissions coal technologies. South Africa has to reduce its carbon emissions in line with our commitments at the climate change conference held in Paris in 2015. Many other nations have made commitments to reduce their own carbon emissions.
The IRP envisages a move towards steadily reducing emissions through a greater uptake of renewables. Alongside this, we need to implement a ‘just transition’ to ensure that communities and workers whose livelihoods depend on the fossil fuel industries are not left behind.
That is why we will be developing a clear framework for the process of decommissioning coal fired power stations that have reached the end of their operational cycle.
The global energy transition will present challenges for communities and workers in the areas where fossil fuel powered energy generation takes place. However it also presents opportunities for those affected to have access to technologies that are more cost-effective and better for human health. It also presents significant investment opportunities in cleaner energies.
For example, the recent natural gas find in the Outeniqua Basin off the Southern Cape Coast gives great hope for future discoveries of coastal gas, including recoverable shale. Opportunities also exist in the fields of biomass, biogas and cogeneration.
While the IRP spells out our long-term plans, we must address our immediate and most pressing challenge to get the lights back on and keep them on. This means we need to get the utility back on sound financial and operational footing.
Though there has been progress in implementing its nine-point plan, Eskom’s financial position remains untenable and its current operational model difficult.
We will soon be announcing the appointment of a permanent Eskom CEO who, together with a strengthened board, will be tasked with turning the entity around. They will be guided by the path set out in the special paper on Eskom, which will be released shortly.
The restructuring of Eskom into three entities – generation, transmission and distribution – is critical if we are to respond effectively to the evolving technologies and developments in the global energy industry. Eskom needs improve its credit rating so that it can raise funding for both his operational and capital expenditure.
The sheer scale of Eskom’s debt is daunting. Further bailouts are putting pressure on an already constrained fiscus. As government has made clear, the most recent support to Eskom comes with stringent conditions. Fruitless and wasteful expenditure must be stopped.
We also must attend to the debt owed to Eskom with urgency. Currently, Eskom is owed in excess of R23.5 billion by defaulting municipalities, and this continues to increase. This municipal debt and that from national government departments must be recovered.
Eskom is also owed huge amounts of money by individual users. This is the time for a frank discussion on the payment of owed money to Eskom by individual users. The culture of non-payment exists in several parts of the country. Boycotting payment for services had a place in apartheid South Africa. It was an effective tool to mobilise communities against an unjust system. But it has no place in present day South Africa. If public utilities like Eskom are to survive, then all users need to pay for the services they receive.
As government, we will continue to do all within our means to restore the viability of Eskom. Tough decisions will have to be made. There will have to be trade-offs. All sectors of society, especially government, business and labour, must work together to bring this crisis to an end.
Our citizens deserve to be able to conduct their lives, go to school and operate their businesses confident that they will not be plunged into darkness without warning. At the same time, as citizens, we must understand that when we do not pay, we are part of the problem.
In trying to improve our own standards of living and those of our communities we all have a contribution to make. Our collective future depends on it.
All the best,