Friday, July 22, 2022

South Africa's Energy Problem

 South Africa is rich in energy but is in the midst of cascading energy shortages. 

On June 28, Eskom announced that it was going to implement “Stage 6 load shedding” due to “unlawful industrial action.” 

“Load shedding” is defined as a rationing measure to reduce the demand for electrical energy by imposing rotational power outages when the supply from power plants is severely constrained. South Africa’s load shedding schedule ranges from stage 1 to 8. Stage 8 represents a full-scale collapse of the grid. Stage 6 has left parts of the country with no power, in the middle of winter, for up to eight hours a day. Load shedding has become part of the everyday vocabulary and one of the defining symptoms of post-Apartheid state decay and political dysfunction.

Under the existing financing model for local government, municipalities are forced to generate profits off the provision of basic services to fund their operations, invest in new infrastructure and pay off existing debt. As of 2021, outstanding municipal debt owed to Eskom stood at over R35 billion, with at least 20 municipalities defaulting on payments. This trend is largely a byproduct of the flawed system of municipal financing.

Eskom’s own debt levels have skyrocketed to about R400 billion. The roots of the debt were sourced from three key areas. Predatory loans granted by the World Bank and IMF for the mega-coal projects Medupi and Kusile both incurred irregular expenditure and overruns. Increases in the cost of primary energy came largely due to shifts to purchase expensive energy from private generators. The debt levels also came from dramatic increases due to the cost of coal from local suppliers.

Two paths lie ahead. One is that liberal technocrats will provide a market-driven solution, whose efforts have failed for the past quarter-century. The other is that the unions can channel the building discontent to force a new social compact. The unions have called for the building toward a mass campaign for a general strike demanding an end to privatization alongside a broad list of historical demands to bring the economy under shared ownership and control.

South Africa’s Energy Crisis Escalates| Countercurrents

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