ANC to blame for energy crisis

SOME of Eskom’s former executives have opted to set the record straight after President Jacob Zuma blamed the utility’s woes on apartheid, for the second time in as many months.

"We don’t feel guilty about the energy issue," Zuma reportedly told the ANC faithful during the party’s birthday bash in Cape Town last weekend. "It is not our problem of today, but a historic problem, one of apartheid, that we are resolving.

"After 1994, we had to provide energy to all, because people had the right to energy, and we suddenly realised we didn’t have enough," Zuma said, before talking about the low price of electricity during the apartheid era and how it was always designed to serve a few if not to attract foreign investment. These were arguments he had also used at the end of last year as the Eskom crisis began to deepen.

True to the characteristic secrecy that defines its operations, the parastatal refused to provide the Financial Mail with copies of planning documents from the early 1990s to test Zuma’s assertion. However, a number of the utility’s strategy people from that period have opted to "let the real story be known".

"Crises of the magnitude we are witnessing today are not new," says Jac Messerschmidt, who served on Eskom’s management board for much of his 32-year career before retiring in 1999.

In the wake of the 1973 oil crisis, Eskom (or Escom as it was known until 1987) lowered its prices and demand for electricity shot up as thousands of users — domestic and industrial alike — began to migrate to the cheaper form of energy. This forced a rush to build three power stations — Arnot, Kriel and Matla — which inevitably forced a sharp hike in electricity prices to part-fund the rapid expansion plans.

What Eskom did not quite appreciate, however, was its relatively unskilled workforce for the kind of plants it had brought on stream, some of which were poorly designed. By 1981, the utility was forced to embark on large-scale load-shedding as it tended to its operational disasters, says Messerschmidt.

This forced the strategists back to the drawing board. Eskom went on an enormous spending spree and commissioned five new stations to help meet demand.

But the economic consequences of the international sanctions imposed on the apartheid state became manifest only in the mid-1980s, says Brian Statham, who headed the planning unit before becoming an Eskom general manager prior to his leaving in 2007. This left them with surplus capacity and a new kind of crisis to deal with.

By the end of that decade, five stations had been mothballed (of which two would eventually be decommissioned, the other three coming back on stream in the early 2000s). A privatisation study was also called for by government in the late 1980s, which favoured selling off the utility. However, that plan came to naught due to the changing of the political guard that began with the unbanning of the ANC in 1990.

The trend across the world at that time was towards the liberalisation of energy markets, and though former president Nelson Mandela talked up nationalisation and people power upon his release from prison in 1990, the tune of the ANC began to change as the party’s leaders toured the world, drumming up investment for the new SA.

"Essentially, the ANC government that began in 1994 opted to bring in independent power producers and Eskom was stopped in its tracks from developing further capacity," says Statham.

"But as the ANC government courted, and was courted by, potential foreign investors, at the same time as Eskom continued planning as though it had a monopoly over the country’s power production, there was little happening in terms of new capacity projects being initiated."

The utility was also regarded by the new government as a relic from an era that had run its course. Any suggestions on the management’s part to build more capacity or plan ahead into the 2000s was interpreted as a bid to maintain the status quo, while predictions of a looming energy shortage fell on deaf ears.

"In the late 1990s, Eskom’s plans clearly predicted that we would have a shortage in capacity somewhere between 2006 and 2008 if we didn’t address the issue of capacity then," recalls Statham. (They were not far off: Black Friday hit the mining sector in the third week of January 2008.) However, by 1998 the white paper on energy was in place and it had allocated all future capacity building plans to independent power producers, so Eskom’s hands were tightly tied.

But the expected foreign direct investment to facilitate the liberalisation plans never materialised, at least not in the energy sector. SA was a new democracy without mature energy policies and regulations; there was a lot of uncertainty and people were reluctant to invest.

"The ownership structure of Eskom didn’t help either," says Ian McRae, the CEO from 1985 to 1994, referring to the fact that the utility provided only a percentage of direct supply, with the rest coming from the extensive network of municipalities who buy in bulk from Eskom, which deterred potential independent power producers, in his view.

But the looming energy crisis was not abating. Shortly after he became minister of public enterprises in 2004, Alec Erwin admitted government had "got its timing wrong". He called on Eskom to begin plans for the construction of two new plants, Medupi and Kusile.

Three years later, then president Thabo Mbeki followed suit and said: "When Eskom said to government: ‘We think we must invest more in terms of electricity generation’ … we said not now, later. We were wrong. Eskom was right. We were wrong."

But, says Statham, by then a lot of the experienced Eskom hands had been retrenched. "And it was also a sellers’ market at that time and with Eskom negotiating these two big projects in a crisis, my sense is they negotiated difficult deals," the fall-out from which we are living with today.


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