Although the risk of load-shedding is still looming large, deputy president David Mabuza says there are positive signs that Eskom is turning the corner.
He told MPs on Thursday that this was partly due to decisive interventions by the government, including putting pressure on national departments and municipalities to settle outstanding debts to the electricity utility.
Eskom, which supplies almost all of SA’s power, is hamstrung by staggering debt of nearly R400bn, with maintenance issues at its ageing power plants leading to bouts of load-shedding, which threaten economic recovery.
“Eskom is starting to show a positive outlook, of course with the cushion of government. All national government departments have paid [what they owed Eskom], coordinated by the minister of public works [Patricia de Lille]. We are now encouraging municipalities to allow Eskom to collect money that is due,” Mabuza said during a question-and-answer session in parliament.
But, by Eskom’s own admission, the power utility is far from being out of danger. It faces high debt-servicing costs, high expenditure on diesel for open-cycle gas turbines to augment generation capacity and to reduce load-shedding, a major skills shortage including engineering expertise, and rising municipal arrears that threaten to cripple the utility.
Municipalities owe it close to R36bn, an increase of nearly 26% from the financial year ended March 2021.
Eskom has been struggling to stay afloat and keep the lights on, and largely relies on government bailouts to continue operating. Before Covid-19 hit, ratings agencies cited its debt load as among the risks to the sustainability of the nation’s finances.
Mabuza, who is the leader of government business, told MPs that the state will continue to financially back the utility for another year and after that it will have to “find a way to be stabilising itself”.
Eskom will continue to receive support from government for the next year. The finance minister indicated that this will be discontinued. Eskom must therefore find a way of stabilising itself.
— Deputy president David Mabuza
“Government took a decision to support Eskom by giving [the utility] R220bn over three years. Eskom will continue to receive support from government for the next year. The finance minister indicated that this will be discontinued. Eskom must therefore find a way of stabilising itself,” Mabuza said.
He added that the government is ramping up the procurement of renewable energy to boost power supply.
“As government, we have created a regulatory environment that is very conducive to opening up the market for alternative power generation producers. Within the framework of the Integrated Resources Plan, alternative energy generation measures are being explored and implemented to augment electricity supply and improve the stability of the grid.”
In a bid to bring additional megawatts onto the grid, in 2021 the government moved to lift the threshold for embedded generation by independent power producers (IPP) without a licence, increasing it from 1MW to 100MW. Embedded generation — when a company produces electricity for its own use or for use by others — is widely regarded as the quickest way to boost energy supply.
Mabuza said currently 292 small-scale generators have registered with Nersa, the national energy regulator. The small-scale producers have a total generation capacity of 187MW. The IPP office is processing offers by independent producers for approval by Eskom and National Treasury. The deputy president said to date the state has procured 7,309MW from renewable energy producers, and most of these power plants are already operational, with less than 400MW still under construction.
Preferred bidders for the procurement of 2,600MW of renewable energy, known as bid window 5, were announced in 2021 with the financial close plan for April 2022. The requests of a further 2,600MW under bid window 6 were scheduled for release this week, Mabuza said. A request for proposals for 513MW of battery storage is due to be released by the end of April, while another proposal for 1,600MW of renewable energy under bid window 7 will be issued in August.
“However, we must make the point that Eskom’s load-shedding is not as a result of limited role of alternative power generation, but mainly as a result of breakdowns encountered from the old and ageing power-generation infrastructure,” Mabuza said.
Mabuza also fielded questions from opposition MPs on speculation that the state wants to enter into an energy deal with Russia, which informed its decision to remain neutral on the conflict between the Vladimir Putin administration and Ukraine.
“I do not know about such a deal,” Mabuza said.
Mabuza — who has visited Russia on several occasions seeking treatment after allegedly being poisoned — added that there was nothing sinister about him choosing a Russian hospital.
“There is nothing sinister; from here [SA] I go to hospital [in Russia], from hospital I come back [to SA]. I am sure honourable members will respect the choice of an individual to choose a hospital,” Mabuza said.
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