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  • Writer's pictureGareth Stokes

Electricity and healthcare: lessons entering and exiting SA’s dual crises

As this writer slumped over his keyboard trying to conjure up a topic for his fortnightly opinion piece, the President signed the National Health Insurance (NHI) Bill into law. Hurrah; but not hurrah. Your writer’s immediate thought was to dash out a few thousand words on why the policy is destined to fail, spiced up with links to the countless warnings published under his by-line over the years. But why bother? It is what it is.

 




Reimagining South Africa

Having made the critical decision to leave the lengthy rant over NHI until next time, attention turned to a recent and somewhat more positive discussion that took place at the PSG Digital Conference 2024. The discussion centred on reimagining South Africa in the context of its myriad economic and social challenges. The big question, according to Dan Hugo, an executive in acquisitions at PSG Financial Services, is how the country can reimagine the production and distribution of electricity to be able to continue and increase economic growth.

 

The session played out as an interview between financial journalist, Alishia Seckam, and Andre de Ruyter, ex-CEO of South Africa’s ailing state-owned power utility Eskom SOC Limited. Seckam began by outlining the systemic issues contributing to the country’s energy crisis. “Systemic issues including procurement policies and political corruption have been cited as some of the major contributing factors,” she said. Problems include ageing equipment; lack of capacity of power plants; ongoing maintenance issues; skills and management deficits; and inferior coal quality, to name a few.

 

R60 Billion in aggregate losses

It turned out to be a ‘no holds barred’ interrogation with Seckam grilling De Ruyter on a track record blighted by R60 billion in aggregate losses over his tenure. “Eskom was not exactly in robust health when I started; when I walked in through the doors of Megawatt Park it was quite clear that this was a patient [almost] in terminal decline,” De Ruyter countered. He commented on operational and financial challenges including an unsustainable debt burden, non-paying customers and political sensitivities that prevented disconnecting municipalities, and saw many Soweto residents refusing to pay for services.

 

This writer was somewhat bemused by the assertion that De Ruyter be held accountable for an institutional failure that was decades in the making given he only spent three years at the helm. The ex-CEO took a cautious, reflective approach to his answers, stating that it would be practically impossible to resurrect the state-owned power utility to its former glory. Africa’s electricity behemoth went from winning Power Company of the Year at the Global Energy Awards, New York, in 2001 to foisting around 6 950 hours of load shedding on customers in 2023, per Statista.com.

 

It does not help that its coal-fired fleet is among Africa’s biggest contributors to greenhouse gas emissions, with one of its recently-commissioned mega plants further benefitting from all manner of state-issued dirty emissions exemptions. This business does not fit the emerging, globally-driven net-zero narrative, and never will… But that, dear reader, is another topic for another day.

 

The ever-present ‘X’ allegations

“In some ways, my job was [to achieve] a controlled contact with ground, a euphemism that pilots use when they come in for a bit of a hard landing,” De Ruyter said, before facing another question that demanded similar next-level piloting skills. Seckam shared a Tweet alleging that De Ruyter and his head of operations had contributed to Eskom’s decline in order to profit from renewables, and asked for his response. It seemed a somewhat unfair question; but De Ruyter took it in his stride, noting that he and ex-COO, Jan Oberholzer, had put in place most of the interventions that are contributing to the somewhat improved power situation early 2024.

 

“People have no idea of the size and complexity of Eskom,” De Ruyter explained. “There are about 82 different [power producing] units across the spectrum, the majority of which are coal-fired, and there is a lead time of about 18 months of planning; of contractor identification; of budgeting; of mobilisation; of procurement of spares etc. [before you can swing into maintenance action].” He hinted that the sums of cash allocated to the country’s open cycle gas turbines made all the difference in short-term electricity availability, noting that his budget had been around R6 billion per annum versus the current year’s R24 billion.

 

He warned that the improved electricity availability in the first part of 2024 was likely due to the electricity producer “pouring money into diesel at a rate of knots.” Hmm. This writer agreed with the initial observation, but the comment regarding a mere R6 billion per annum in diesel spend during the ex-CEO’s tenure prompted a quick investigation. A superficial search reveals that just (sic) R5.8 billion went ‘up in smoke’ in 2020 followed by R5.75 billion and R8.6 billion over the next two years. De Ruyter resigned in December 2022, and Eskom splashed out over R20 billion in 2023. PS, these diesel burn estimates courtesy Daily Maverick.

 

A glimpse into the future

Seckam then shifted the conversation towards the future of South Africa’s energy sector. “Given your insider perspective and all the revelations, do you get a sense that we are starting to turn the tide?” she asked. De Ruyter acknowledged some progress but expressed concerns over the current policies: “From a policy perspective, when you look at the latest incarnation of the Integrated Resource Plan 2023, we are seeing a regressive policy environment when it comes to addressing our power issues,” he said, emphasising the need for a shift towards renewable energy in the context of the current overreliance on coal.

 

And then, the tried-and-tested ‘private sector must help’ ditty. De Ruyter highlighted the potential for private sector involvement in addressing the ongoing energy crisis. He commented that the recent Electricity Regulation Act Amendment Bill was encouraging because it allowed for the creation of a ‘freer’ electricity market. “When you have a market, you will have private investors piling into power generation,” he explained. This investment would predominantly involve renewable energy which is arguably the most cost-effective solution for the country’s energy woes.

 

The caveat is that grid or transmission capacity expansion is non-negotiable to accommodate more renewable energy projects. PS, countless opinion writers with far better electrification knowledge than yours truly have commented on the white elephant nature of solar installations in the Northern Cape versus the inability to either store that power for later use, or transmit said power to where it is needed.

 

The political will conundrum

As the conversation drew to a close, De Ruyter stressed the need for regulatory change and political will to attract foreign investment and support sustainable energy solutions. “The regulatory changes can be made relatively quickly; we have enough smart people in the country who know exactly what needs to happen from a regulatory reform perspective,” he said. Sadly, the potential for significant, short-term improvements in the country’s electricity distribution, generation and transmission are stymied by inadequate political support and will.

 

This writer enjoyed the 45-minute-long Seckam versus De Ruyter interaction; but could not resist a parting ‘barb’ to highlight the similarities between Eskom’s decades long decline and the looming annexation by the government of the country’s private healthcare sector. It felt a bit like the headline, that we are hopefully nearing the end of one crisis, but setting off at the start of another. You might use Eskom as a proxy for the public healthcare sector and say something like: “By following its Eskom roadmap, government turned a world class public clinic and hospital infrastructure into something of a smouldering wreckage in just two decades”.

 

Alternatively, you could imagine yourself 20-years in the future, with the quote being: “In 2024, those South Africans who could afford it, enjoyed world class medical services. Today, the once state-of-the art private sector infrastructure lies in ruin. Millions are waiting in vain for help from an under-staffed and under-funded system while those with money, including the government fat cats, take an anywhere but here approach to their hospital and medical specialist needs.

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