The past month saw the 2022 Mining Indaba come and go while we spent some more time in the dark. Unsurprisingly, we have seen a lot of unhappiness on the load shedded local front culminating in calls by, amongst other, the DA for the declaration of a State of Disaster at Eskom. DA spokesperson on Public Enterprises Ghaleb Cachalia didn’t mince his words: “People are dying, businesses will die, ports are closed and the country will grind to a halt”. In the context of soaring global diesel prices Eskom’s diesel spend is estimated to exceed R15 billion this financial year! And considering the Deputy President has now clarified that the Medupi and Kusile design defects are only expected to be rectified in 2027 the situation, as we all know, isn’t going to get better over-night.
Disturbingly, in response to questions around the security of energy supply in Parliament on 4 May, Public Enterprises Minister, Pravin Gordhan’s said the governmental hasn’t considered a state of disaster because it has “internal plans to manage the power system which will allow [Eskom] to implement up to stage 8 load shedding to avoid total collapse”. Surely stage 8 load shedding, which would see up to 13 hours of power cuts a day, is not the best solution for the proposed owner of the Transmission System Operator to be tabling…
It does also seem a strange approach when the chair of the DBSA board, Mark Swilling, is saying at Davos: “our energy system literally is collapsing … Our economic recovery plan has got no chance if the energy system is not fixed … but … [i]f we get this right, it’s actually the future of South Africa” . That said, Team South Africa must have done a pretty decent job at the first in person World Economic Forum in three years if Dr Leila Fourie, CEO of the Johannesburg Stock Exchange, is receiving investor feedback calling ‘South Africa the safe haven of emerging markets’. And if you consider that the NASDAQ is down by about 13% over the last year, compared to the JSE all share index’s 5% growth over the same period, South Africa is really looking attractive.
In addition, S&P Global seems persuaded by, amongst other things, South Africa’s policy shifts in the energy sector: after the credit rating agency Moody’s upgraded South Africa’s outlook last month, S&P Global has now also improved its outlook from “stable” to “positive”. It appears that their positive outlook has not been in vain because we (finally) have a date for signature of, at least some, Risk Mitigation Programme Power Purchase Agreements: 2 June 2022 (i.e. tomorrow).
We have also seen a fabulous regulatory achievement over the last month with the first two private power projects being granted their 100MW generation licence by NERSA. With this milestone under the country’s belt and bearing in mind the large number of mining companies releasing RFPs in the last year, there is real hope that the private sector will be able to help SA Inc keep the lights on. After all, the mining industry alone consumes about 30% of Eskom’s annual power supply and if the biggest mine in the country, Gold Fields’ South Deep, is comfortable it will be able to procure at least 25% of its electricity needs from solar by Q3 of 2022 there certainly is hope.
In fact, South Africa is hoping that it’s $8.5 billion climate finance package (announced in November 2021 at COP 26) will not only spur its shift away from the use of coal but also assist our country to kickstart green hydrogen and electric vehicle industries. The deal negotiators are also hoping that this deal will be a ‘model or benchmark that can be emulated’ by other developing countries as they migrate towards what UN Secretary-General António Guterres has described as the ‘lifeline’ right in front of us to enable us to prevent the worst impacts of the climate crisis and jump-start the “peace project of the 21st century”.