South Africa energy blackouts: Ramaphosa skips Davos to tackle crisis | CNN Business

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South Africa’s President Cyril Ramaphosa was forced this week to cancel a trip to Davos by an escalating energy crisis that is inflicting rolling blackouts on the continent’s most developed economy.

Ramaphosa swapped his trip to the World Economic Forum in Switzerland for emergency meetings on the “ongoing energy crisis,” his spokesperson Vincent Magwenya posted on Twitter on Monday.

South Africans have endured power cuts for years but 2022 was the worst on record with 205 days of rolling blackouts, as aging coal-fired power plants broke down and state-owned power utility Eskom struggled to find the money to buy diesel for emergency generators.

So far this year, there have been outages every day. The situation worsened again last week when Eskom said it would implement more cuts because of breakdowns at 11 coal-fired generating units.

“Loadshedding” — as it’s known locally — was escalated to level 6, which entails removing 6,000 megawatts (MW) worth of power from the grid in order to rebalance demand and supply. This can result in outages lasting 4.5 hours at a time and totaling 12 hours a day for households and businesses. At peak times, demand in South Africa averages between 28,000 MW and 34,000 MW.

There was a slight improvement on Tuesday, but Eskom cautioned that the blackouts could escalate again at short notice “due to the inherent unreliability of the coal power station fleet.”

Loadshedding is hobbling small businesses and jeopardizing economic growth in a country with an unemployment rate of 33%. South African bank Nedbank estimates that GDP could be two percentage points higher in the absence of the electricity constraints.

“This would put potential GDP growth closer to 3.5%, rather than the average growth of 1.3% since 2010,” senior strategy analyst Walter de Wet said in a report last year.

Eskom supplies the vast majority of South Africa’s electricity via a fleet of coal-fired power stations that have been overused and under maintained for years. Taking units offline to perform crucial maintenance work exacerbates loadshedding in the short term because Eskom has very little backup power.

This problem was supposed to be fixed by building two of the world’s biggest coal-fired plants, Medupi and Kusile, in the Limpopo and Mpumalanga provinces of South Africa.

But 15 years after construction started, these plants are only delivering about half of their 9,600 MW combined capacity because of breakdowns, technical defects, completion delays and accidents.

“They should have been delivering properly in 2015,” according to Chris Yelland, an energy analyst and managing director of EE Business Intelligence, a consulting company in Johannesburg. “That’s why we are where we are. If [Medupi and Kusile] were working properly it would reduce the amount of loadshedding by four to five stages,” he told CNN.

Cost overruns amounting to billions of dollars at the two mega plants have helped drive up Eskom’s debt to 389 billion rand ($22.7 billion), leaving it in a precarious financial position. Electricity theft, including by impoverished townships in South Africa, and non-payment by municipal customers have made matters worse.

The utility has lost money for years and relies on government bailouts to remain solvent. For the year ended March 2022, it reported a loss of 12.3 billion rand ($723 million) — an improvement on the previous year’s loss of 25 billion rand ($1.5 billion).

Despite steep tariff increases for customers, Eskom is still unable to cover its costs.

Years of mismanagement and systematic corruption are believed to be a key reason why the state utility has been unable to keep the lights on.

A wide-ranging commission of inquiry led by Judge Raymond Zondo into corruption and fraud in the public sector in South Africa concluded that members of Eskom’s former board should face criminal prosecution due to management failures and a “culture of corrupt practices.”

Under South Africa’s former president Jacob Zuma, Eskom went through repeated leadership changes. Evidence presented to the Zondo commission suggests that this was part of a plan by Zuma and his allies to steal taxpayers’ money from the utility, including through lucrative coal supply contracts. Zuma and his allies deny wrongdoing.

Eskom welcomed the report by the Zondo commission and said in April 2022 that it had set up a team to “ensure that the report is reviewed, understood and appropriate actions are taken.”

The utility’s own financial statements reveal that 104 confirmed cases of fraud and corruption were registered with the South African Police Service over the year to March 2022. But it remains to be seen whether Eskom’s graft problem can be rooted out.

The current CEO André de Ruyter, who has announced his intention to resign after trying to tackle corruption and overhaul the troubled utility, was allegedly the victim of an attempted cyanide poisoning last month, according to multiple reports.

“Eskom cannot comment further on the poisoning incident involving the group chief executive, which occurred during December 2022, as the matter is subject to police investigation,” the utility said in a statement shared with CNN.

Despite an abundance of sunshine and wind, South Africa still derives about 80% of its electricity from coal. The country also has one nuclear power station.

The contribution from solar, wind and hydro power amounted to 13.4% of the total energy mix in the first half of 2022, according to South Africa’s Council for Scientific and Industrial Research.

The share of renewable energy has been steadily increasing over the past decade and the government recently approved new wind and solar projects under a long-running program to procure renewable energy from independent power producers.

According to Cape Town-based Futuregrowth Asset Management, the program attracted more than 209 billion rand ($12.3 billion) in private sector investment between 2011 and 2020.

But crumbling grid infrastructure and capacity constraints remain a key impediment to clean energy expansion.

Renewable energy is also “not the silver bullet that people want it to be,” said Lungile Mashele, a South African energy specialist.

That’s because it cannot meet demand at peak hours in the evening, when there is very little sunshine and wind. Battery storage, meanwhile, adds significant costs, she said.

South Africa has been promised $8.5 billion from rich economies, including the United States, Britain and the European Union, to help its energy transition.

US Treasury Secretary Janet Yellen will underline America’s commitment to the partnership on a trip to South Africa later this month, when she will visit the coal mining region of Mpumalanga, according to a statement from her department.

Fixing Eskom’s aging fleet and bringing new renewable energy projects online won’t fix load shedding overnight.

South Africa’s National Energy Crisis Committee, a body run out of Ramaphosa’s office, has proposed several measures to ease the crisis in the short term, including importing energy from neighboring countries and buying excess energy from private producers.

Emergency legislation is also being developed to allow the faster approval and development of power plants, according to Mashele, who said that many of these measures had been proposed in the past but would not happen quickly or were not viable. For example, several of South Africa’s neighbors, including Namibia, Zimbabwe, Zambia and Botswana, either don’t have excess electricity or are dealing with loadshedding problems of their own. South Africa already imports energy from Mozambique, she said.

Speaking on the sidelines of the WEF in Davos, South Africa’s finance minister Enoch Godongwana told Reuters that loadshedding would be “a thing of the past” in the next 12 to 18 months.