South Africa battles to keep the lights on

Historically ahead of its neighbours in energy generation, South Africa is now suffering frequent power cuts. Dianna Games analyses the origins of the problem and the electoral repurcussions it could have for the government.

When the lights went out in South Africa earlier this year, no one was more shocked than President Cyril Ramaphosa.

The country was plunged into darkness in March this year after six electricity generating units went down on one day, and the power utility began a process of rotational power cuts (“load shedding” in local parlance) for eight days.

Shops, offices, factories and homes battled to manage the sudden cuts and social media outrage went off the charts.

The government confirmed that the ailing power utility, Eskom, was technically insolvent, with debts of about $30bn.

This came as a shock to South Africans, who rely on the utility for more than 90% of their energy. 

Ramaphosa, head of the ruling African National Congress (ANC), told the media he was shocked and angry “that we have reached this stage of dysfunctionality”.

But many citizens pointed out that he was the country’s second in command during the decade of Eskom’s worst decline.  

Ramaphosa’s then boss, the former president Jacob Zuma, has been widely blamed for the current woes.

A judicial commission is currently investigating allegations of state capture, corruption and fraud in the public sector under his presidency.

It is alleged that Zuma’s friends and connections were allowed to loot Eskom and other public bodies and secure lucrative and inflated procurement contracts.

But the problems began before that. Key among them is the fact that two new coal-fired power stations designed to add 4,800 MW each to the grid have failed to do so after suffering years of commissioning delays and enormous cost overruns.

Links to the ANC also pop up in this deal – its investment vehicle, Chancellor House Holdings, is the black economic empowerment partner of the power stations’ contractor, Mitsubishi Hitachi Power Systems Africa.

Breakdowns at old power stations are reaching catastrophic levels, and to add to the problems, many municipalities, particularly in low income areas, are not paying what they owe – an amount of $13bn and rising. Soweto alone owes over $1bn to the utility.

This leaves South Africa with a strategic industry drowning in debt. Foreign borrowing has become more expensive as a result of successive ratings downgrades.  

Signs of Eskom’s deterioration became evident in 2015, when a country that has historically outperformed its peers in Africa in energy provision experienced nearly three months of regular blackouts.

Businesses were left high and dry and consumers, unused to managing blackouts, battled to cope. Those who could afford it turned to generators, once regarded by many South Africans as a faraway symbol of service delivery failure in other African countries.

The taxpayer, already paying for bailouts of other state-owned enterprises, is being forced to help Eskom dig itself out of the hole.

The government recently agreed to give Eskom a $5bn lifeline and the utility is seeking approval for a 56% rise in tariffs over the next three years. 

Ramaphosa has few options to restructure the organisation, given the fierce resistance to privatisation by the country’s powerful trade unions.

They have also opposed his proposal to break up the large organisation into three separate operating units, because of potential job losses.

The vastly overstaffed entity, which has 48,000 employees, has to rely on natural attrition to reduce numbers. 

Some unions have also opposed government’s independent power producer plans on the basis that reduced usage of grid power will also lead to job losses.

The price of mismanagement

The crisis couldn’t have come at a worse time for the ANC, which faces a hotly contested election on 8 May.

The power cuts are tangible evidence for those citizens who have the luxury of grid power of the party’s poor performance over decades.

For the ANC’s critics, the blackouts have come to symbolise the price that the public is paying for alleged corruption and mismanagement.

Party officials have vainly tried to convince voters that the power cuts are a symptom of high economic growth, rather than state failure.

This has generated ridicule, particularly as South Africa, with growth of 1.2% predicted for 2019, is one of the continent’s slowest growing economies.

During the power cuts, many people took to social media to declare they will no longer be voting for the ANC.Analysts believe the biggest swing will be among middle-class black South Africans.

The crisis has provided rich pickings for opposition groups who have seized on the issue to discredit the ruling party.

The main opposition party, the Democratic Alliance, has accused Ramaphosa of playing a central role in the systematic destruction of Eskom.

The ANC has won all elections since 1994 by a wide margin despite a poor record of service delivery, blatant corruption and mixed governance. It is expected to win again in 2019 – but with a much-reduced majority. 

Eskom has managed to avoid more load shedding as the elections approach. But the authorities admit there is no short cut to fixing the utility. No real improvement is expected until at least 2021. 

Meanwhile, South Africans are bracing themselves for a long and dark winter.

Dianna Games is CEO of Africa @ Work, an advisory company focusing on African business