PALI LEHOHLA | Just energy transition: don’t be fooled by St Peter’s mother dressed up as Matthew

For those who followed our woes and listened to the epic state of the nation address, it is better to seek umbrage with the Holy Book. As Ecclesiastes says in 1:9 “nothing is new under the sun”.

But Matthew 18:1 becomes even more instructive for those contesting Eskom and advises: “If your eye causes you to stumble, gouge it out and throw it away. It is better for you to enter life with one eye than to have two eyes and be thrown into the fire of hell. If your hand or your foot causes you to sin, cut it off and throw it away. It is better for you to enter life crippled or lame than to have two hands and two feet and be thrown into the eternal fire.”

The Sona concluded on this note, emphasising the restructuring of Eskom and the just energy transition (JET): “So as to remove any confusion, the minister of public enterprises will remain the shareholder representative of Eskom and steer the restructuring of Eskom, ensure the establishment of the transmission company, oversee the implementation of the JET programme and oversee the establishment of the SOE holding company.” 

Part of the JET aim is the closure of a number of coal-fired power stations. The victory has been in Komati, now being turned into a kindergarten, and Grootvlei.

The February 9 2023 state of the nation address (Sona) was probably the most challenging a president could deliver. As was the previous Sona last year, this one took place in a makeshift venue since parliament was gutted by fire in January 2022. The delays at the beginning were to be expected given our multiple crises, not least the Phala Phala point of order the EFF rose on repeatedly in parliament. The speech was delivered against tonnes of challenges. Worst of all was the persistent darkness besetting the country. Like a high school principal, the president announced he would soon appoint a head prefect to chase the naughty boy called electricity. The two ministers of mining and energy and public enterprises would continue with their other functions except electricity.

These countries have become Saint Peter’s mother, turning their backs on South Africa. 

Reactions to the announcement of an electricity minister, like the declaration of a state of disaster, were mixed.. The question is: does the declaration of the state of disaster and appointment of minister of electricity make sense? To address this fundamental flaw in administration, one must understand a system that is organic and one that is not. Modern management of functional specialisation focuses on what is core and non-core. They argue about what the profit centres are. As the Holy Book advises our modern managers on the art of discarding limbs for a seat in heaven, our JET programme has just outdone itself — black as coal and wanting more of the coal we discarded in our quest to escape hell because it is better to get to heaven without coal than to rot in hell because of it. Our holy Matthew trinity, Germany, England and the US, is back to using coal, while cautioning us against the prospect of hell. 

At Harvard Business School and others, we learn about value destruction, especially one brought by so-called turnaround strategists. The philosophy and theoretical foundations of these turnaround accountants are etched in the shock therapy economics of Milton Friedman. Theirs is to discard and discard whatever they find to be non-core or troublesome. They are the true disciples of Matthew. Theirs is an accounting relationship, which is short-term and devoid of political economy content. This is in contradistinction to what the issues are about. The issues at hand are economics, which defines a long path to setting the true content of shareholder value. These accountants who now define shareholder value are on a suicide mission. They believe they must enter life crippled rather than to be thrown into the eternal fire with troubling limbs. Our Matthew trinity has left us crippled and in hell. And they, seen at least through the haze of the inferno, are definitely not in hell. Who in Germany, US or the UK is experiencing an electricity bungle of deindustrialisation like we are here in South Africa? We are in hell, they are not. They have put back the eye they gouged out and reattached the rotting limb. And they did so because heaven, not hell, came their way when the energy crunch came. Our religious fanaticism has left us, like those who were party to Saint Peter’s mother on earth. When Saint Peter rescued her from the gates of hell, she started scolding others who also sought rescue — us. These countries have become Saint Peter’s mother, turning their backs on South Africa.

Some Harvard professors such as Thom Peters lashed out at not only Wall Street but Harvard Business School for producing the kind of professionals who would work at Enron and cause that 2000s debacle across corporate USs. Enron is a close cousin to Eskom. Both are responsible for energy. The corporatisation of Eskom and now its privatisation bring it close to an Enron. Eskom is burdened with debt it should not have taken. It’s on its knees because it was asked to buy electricity from renewables at a price it could not sell at without making a loss. These quotations were accountancy prices, not economics prices. 

Eskom is owed money by the private sector, entities of the state and the populace, and they are refusing to pay it. The sequence of events that forced the corporatisation of Eskom triggered this state of affairs, breeding greed and corruption. A month away from its 100th-year anniversary, Eskom has all fingers pointing at its corruption and uselessness, yet if it coughed the last cough all would perish and have no access to its generosity. The poor, who have no access to unaffordable renewables, no access to biomass because it is unavailable, no access to government support because of the network requirements of deploying such infrastructure, are going to be in dire straits, especially as winter creeps in. 

The president spoke of rolling out generators and rooftop solar panels. There are 15-million housing units, which include about three-million shacks in the country that cannot afford an inverter, a generator or a rooftop solar panel. Let us set aside affordability. Even if the president were to donate any of these to these households, connecting 15-million units to whatever grid other than Eskom is mission impossible.

The price of cutting off limbs is classically illustrated by the solution put forward at the Sona: “Eskom has launched a programme to buy excess power from private generators and has already secured 300MW from our neighbouring countries.” A thinking person would not have closed Komati down three months ago at its 1,000MW capacity, with the last unit pumping 121MW, and go cap in hand to the Sadc for 300MW. In the first instance Komati was closed down in return for a promised 77MW.

Eskom as an engineering behemoth cannot be subjected to value-destroying accountancy.

But these megawatts will only be produced in two years’ time. Obviously at an energy availability factor of the just energy transition, of 30%, this comes to a pithy 21MW. It is sinful to be led by accountancy and not economics, and an existential threat when politics is devoid of political economy. Political economy is seized with organic relationships, not the core and non-core artefacts of accounting.

Eskom as an engineering behemoth cannot be subjected to value-destroying accountancy. Neither can a national state of disaster nor the appointment of an electricity prefect overcome this existential threat. The risk we face as Eskom approaches a centenary points us to what is needed — engineers and economists who are passionate about Eskom’s mission as a state entity that supplies energy at an affordable price to industry and society.  The challenges Hendrik van der Bijl faced in 1923 are the ones we face today. As Madiba would have been 105 today, we need to enjoin our deeply flawed politics and economics and look at them through his lens and Bijl’s.

“In 1923 the Electricity Supply Commission (Escom) was founded. As chair, Van der Bijl borrowed R16m from the state and began putting his plans into action. From the outset the undertaking was success, and within 10 years Van der Bijl was able to pay back the state loan. Under his expert guidance, Escom progressed from strength to strength, and within a short period of time Van der Bijl was able to fulfil his promise: South Africa was assured of sufficient inexpensive power for its fast-growing industries.”

And as Ramaphosa quoted Madiba in his Sona: “Out of the experience of an extraordinary human disaster that lasted too long, must be born a society of which all humanity will be proud. Our daily deeds as ordinary South Africans must produce an actual South African reality that will reinforce humanity’s belief in justice, strengthen its confidence in the nobility of the human soul and sustain all our hopes for a glorious life for all.”

The words and deeds of Madiba and Van der Bijl are what we need to embed, interpret and act upon. Therein can we enjoin our future and escape this existential threat. It is about science and political economy, not frantic accountancy and corrupt politics.

Dr Pali Lehohla is the director of the Economic Modelling Academy, a professor of practice at the University of Johannesburg, a research associate at Oxford University, a board member of Institute for Economic Justice at Wits and a distinguished Alumni of the University of Ghana. He is the former Statistician-General of South Africa.