Roberto CoelhoBy Roberto Coelho|November 30, 2021|7 Minutes|In Opinion


"Mission Impossible"

“Former South African finance minister Trevor Manuel recently said, “South Africa can do the impossible, it is the simple we struggle with. ”After our previous discussion on Eskom’s broken properties and the double challenge of load shedding combined with a debt spiral, impossible could the best, if hardest, word.”

It is one of South Africa’s greatest battles, attempting mission  impossible to restore electrical production to sustain the economy.

Before solving the problem, full transparency is required. Whatever happens, South Africa will have load shedding for the next few years.

“Things are not good at the moment, 2021 was worse than 2020 in terms of hours lost to loadshedding” as quoted by Chris Yelland an experienced and respected energy expert in South Africa.

Load shedding is simply inevitable, with continuous maintenance required for older power stations and new power stations not operating at the required capacity.

“Intermittent load shedding will continue for the next years and new power is delayed for a further three years.”

After a harsh reality check on the current situation, it is now possible to discuss the current positives hidden under Eskom’s web of darkness.

Beginning with Andre de Ruyter, the experienced CEO who took over at Eskom in early 2020. He has taken his time to understand the complexities of the business. He has successfully implemented changes in operations and cultural areas at Eskom by enforcing accountability and quality.

“He is the first CEO of Eskom that understands what it takes to be a utility of the future. Most previous CEOs have been backward-looking to restore Eskom to its glory days, which is impossible. “

The world has changedtowards a different, more sustainable and efficient ,future.

“There is no going back to what Eskom was. He understands there is a need for change.”

To change is to find solutions to South Africa’s electricity problems. Yelland believes the solution begins witha restructured Eskom.

“It is important for Eskom to restructure. They cannot be structured as they were 90 years ago, it is no longer appropriate to be a vertically integrated monopoly.”

The first port of call will be to split Eskom into three separate entities, Generation, Distribution, and Transmission.

“Eskom has two toxic businesses, Generation and Distribution, and one good business, Transmission.”

This process of restructuring began in 2020 and is on track to separate Generation and Transmission by the end of 2021 and Distribution by the end of 2022.

By splitting the divisions, each business has its own opportunity to raise capital. Furthermore, each business will be leaner and nimbler reducing bureaucracy and increasing efficiency and accountability.

“Transmission is a well-run business but because it is bundled with the other two it cannot raise capital to modernize.”

Each business will be required to operate at a level to ensure creditworthiness and reduce the burden on the state.  However, the split is only the beginning.

The entire distribution industry must be modernized to ensure reliable electricity. Currently, 50% of Eskom’s sales are to bankrupt municipalities, which do not pay Eskom.

By restructuring the distribution industry, a diverse customer base will be created which is not reliant on municipalities.

Together with securing a diversified customer base, the necessary skills and accountability are required within the Distribution company.

Once the distribution industry is modernized, revamping generation is the final piece of the puzzle.

“I believe to have a competitive and diversified generation sector we need an independent grid.”

The aim isto consolidate over 100 separate generation businesses tofive and list these as separate entities on the JSE.

“This will attract the necessary capital, skill, and technology to run as a proper business.”

However, South Africa’s political landscape turns to animosity when discussing the privatization of business, which is counterintuitive.

By encouraging public listings, these entities will be forced to operate efficiently, and transparently as most other listed businesses do.

“I like to say let’s not talk about privatization, let’s talk about increasing the public participation in the business of Eskom.”

Currently, there is one shareholder of Eskom, the government, which  has proven to be lenient with taxpayers’ hard-earned money.

By creating a public company ,everyone with a pension fund to a retirement annuity may have a say in the dealings at the former Eskom’s generation’s division.

Lastly, a more vigorous regulatory change must be made to encourage private and public partnerships together with individual power producers to ensure a diverse range of electricity producers.

“My vision of the future of South Africa’s electricity generation is for five former Eskom generational entities, private/public partnerships, municipal generators, independent power producers, and on-premise generators, to remove all electricity constraints and reduce prices.”

Yelland’s vision ensures reliable, clean, and cheap electricity for all South Africans.

However, the future is in the hands of the decision-makers and if they are not willing to implement the change this vision will not become a reality.

Thus, the future holds an impossible mission, however as Mr. Manuel said, South Africans achieve the impossible and if the past is anything to go by – we will succeed, again.

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