South Africa’s Energy Crisis

Medupi, South Africa: Aerial of a power station in South Africa.

South Africa’s corruption problems have spread to its debt-ridden Eskom, Africa’s largest energy supplier, which supplies 95% of the country’s power supply. Constant blackouts affect everyone, especially the economy. Eskom group CEO André de Ruyter recently told a Daily Maverick event dealing with energy that a just transition away from coal was “the only solution.” This would also boost the economy and address environmental concerns. He referred to Eskom, founded in 1922, as a technology that had reached the end of its life.

The economy was adversely affected by the energy crisis. In 2021, it was estimated that this had significantly limited economic growth by 3%, costing around 350,000 potential new jobs that year alone. In 2022, the business analysis firm Intellidex estimated it would cost R500 billion (US$28 billion) over three years to resolve the crisis.

How did it come to this?

Through mismanagement and corruption, the African National Congress (ANC) took over a well-run concern in the 1990s. In 1994, Eskom focused on the neglected and vulnerable areas that had been ignored and offered cheap electricity. However, Eskom’s budget to continue building new stations was not approved.

Presidents Thabo Mbeki in the late 1990s and Cyril Ramaphosa in 2018 made incorrect decisions, hoping to privatize Eskom or parts of it. Therefore, Mbeki rejected the new Eskom investment, as did Ramaphosa. The latter had unbundled Eskom and offered private independent producers (IPPs) 30%, hoping to attract new IPPs and new energy. There had been no takers. When two new power stations were eventually approved, it was too late and very costly. Mbeki’s failure to attract investment offers increased energy prices. IPPs first wanted Ramaphosa to reform the market structure. His unbundling and disallowing Eskom to compete with IPP led to Eskom’s unprofitability.

Until recently, Eskom was overstaffed by some 60%, which swallowed millions. However, by 2008, the company was bedeviled by corruption and poor management. Many problems date back to the Jacob Zuma era, when Eskom was prey to the notorious Gupta family. They were given lucrative contracts to mine coal, but their mines needed more than the amount or quality of coal required.

Despite increased investment in renewable energy, coal remained the primary source, despite being both environmentally unfriendly and consuming large amounts of water in a water-stressed country. 

Eskom group CEO André de Ruyter told a Daily Maverick’s event on energy in November this year that a just transition away from coal was “the only solution.” This would also boost the economy and address environmental concerns. He referred to Eskom, which dates back to 1922, as a technology at the end of its life.

South Africa’s R1.5 trillion 5-year Transition Investment Plan was successfully presented at the recent global climate negotiations. It outlines the transition from coal dependency towards cleaner energy sources, including renewables. This is based on the hope to decarbonize South Africa through the electricity sector and expand the use of green hydrogen. De Ruyter praised the country’s sun and wind, saying they could not be stolen or exported. However, he added that resolving the energy security issue is needed to consider people’s needs.

The plan also addresses Eskom’s debt issue. Thus, in time and with funding, good management can restore Eskom’s capability to aid the economy’s recovery. South Africa’s high unemployment rate and huge rich-poor divide need to be urgently addressed.