Energy sector to Ramaphosa: What now for Eskom unbundling?

President Cyril Ramaphosa appears to have backed down on his earlier decisiveness to tackle Eskom by unbundling the bankrupt utility, say energy experts.

Reacting to his State of the Nation address on Thursday, they say Ramaphosa never mentioned the unbundling of Eskom once, but focused instead on bringing forward payments in the government’s huge financial bailout to the ailing utility.

Thomas Garner, chair of the SA Independent Power Producers’ Association, said Ramaphosa’s speech gave neither direction nor certainty to the energy industry.

“I was gobsmacked. I thought we would have real stuff but it was a lot about dreams. The president has backtracked from speaking about unbundling Eskom in his first SONA to talking about a bigger government package to save it. He didn’t even mention unbundling.”

“We would have liked to hear about a definite plan for Eskom’s unbundling, that a chief restructuring officer would be appointed in the next two weeks to start it,” Garner said.

Garner said it was very worrying that the president had made no mention the Integrated Resource Plan (IRP) that was released as a draft in August but has still not been finalised.

The private sector had invested more than R200bn in renewable energy in South Africa to date, but would not invest more without certainty from government that it would be part of the future electricity mix.

‘No direction’ 

Although Ramaphosa said the country must increase the contribution of renewable and clean energy in the country’s electricity mix, Garner said that was too vague a statement to draw investment.

“The industry got absolutely no direction or certainty from that speech. There are willing investor for renewables, but capital will only follow certainty and there is none now,” Garner said.

Hilton Trollip, a senior researcher at UCT’s Energy Research Centre said it appeared that Ramaphosa was making “massive compromises” to stay in power.

“He has backed down from his earlier SONA speech of unbundling Eskom – which is the only way to go to save the electricity system in this country. His earlier SONA speech was decisive about unbundling Eskom, but then he bumped into the unions and seems to have been paralysed,” Trollip said.

Trollip said Ramaphosa had seemed to be speaking as the president of the ANC rather than the president of the county.

“There seems to be a merging of the party and the state. He is someone trying to survive in the ANC.”

Ramaphosa announced on Thursday that government would table a special bill “on an urgent basis” to enable it to give a bigger slice of the R230bn rescue package to Eskom in the next few years rather than spreading it out over 10 years as planned.

Trollip said throwing money at Eskom, with an outdated organisational structure, would not solve the country’s energy problems, whereas splitting Eskom into three separate companies, responsible for different functions, would do so. This was recognised in this year’s budget documents that said the unbundling of Eskom – following the example of many utilities globally – would “set the electricity sector onto a new path”.

‘Very thin in detail’ 

Engineer and energy expert Chris Yelland described Ramaphosa’s speech as “very thin on detail” regarding energy.

“The broad message about Eskom was: ‘We as government are going to support our company.’ Not a single word about unbundling, just about the government bailout. No mention either of the IRP and the future of our energy mix. The president started off about this being the time of implementation, but we did not see a lot of it. We saw the big picture dream part, but we’ve had years of visions and dreams, we need to implement things now.

“On the other hand we probably would never see details about energy in a political speech in Parliament. They’re not ready to make those details. It all still needs be to thrashed out with stakeholders – but at some stage soon government is going to have to make some pretty difficult choices,” Yelland said.

Bukelwa Nzimande, head of Greenpeace Africa’s climate and energy campaign, said with Eskom effectively bankrupt, government could not afford to “keep throwing billions of rands that we don’t have at the problem”.

“The time has come to take critical decision about Eskom’s future. The truth is that with economic growth stalling, massively ballooning government debt to bail Eskom out yet again simply is not viable,” Nzimande said.

She welcomed Ramaphosa’s statement that the country could be at the forefront of green growth through increasing renewable energy, but said achieving this was dependent on creating policy certainty by finalising the IRP.

“Neither the IRP nor its timelines were mentioned and we are left wondering how anything the president mentioned will actually be achieved.”

Climate change 

Nicole Loser, attorney at the Centre for Environment Rights, applauded Ramaphosa for recognising the existential threat posed by climate change to people and livelihoods and his call for bold and ambitious action.

However, she said South Africa’s plans for more coal-fired power stations and boosting the coal mining industry, contradicted these objectives.

Davin Chown, chair of the SA Photovoltaic Industry Association was more optimistic. 

Chown said it was “extremely encouraging” that Ramaphosa was clear that South Africa needed to deal with climate change and embrace low carbon economic industrialisation.

“His statement on increasing renewable energy in the energy mix, including renewables in the re-industrialisation of South Africa through local manufacturing, is a welcome positive signal that South Africa needs to catapult us toward economic regeneration,” Chown said.