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South Africa’s energy crisis: the failures of post-1994 neoliberalism

South Africans went from having the most affordable electricity prices in the world to the exorbitant prices they have today
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An unprecedented energy crisis is currently rocking South Africa. The primary power company of the country, Eskom, has been unable to meet the country’s demand for electricity since 2007, with the crisis coming to a head in recent times. By the end of 2022, the nation had cumulatively endured unprecedented load-shedding hours of about 201 days. Rather than improve, the situation worsened in 2023. As a result, one of Africa’s most industrialized economies sometimes experiences up to a twelve-hour blackout a day. While there are many factors responsible for this energy crisis, South Africa’s post-1994 neoliberal policies are the main driver of this crisis.

The technical and engineering challenges at Eskom

South Africa’s failure to build new power plants to replace outdated generating units, avoid load shedding, and keep up with economic growth has been an issue since 2007. Between 1961 and 1991, Eskom built 14 new power plants with a combined total capacity of 35,804 MW, all for the benefit of the few privileged bourgeoisie class and their industries. In the ensuing 30 years, from 1991 to 2021, Eskom only constructed one brand-new power plant, Majuba, with an installed capacity of 4,110MW. Many expected that the African National Congress (ANC) administration after assuming office in 1994 should have prioritised expanding the fleet of Eskom power plants to serve the population that was excluded during the apartheid regime, but this did not happen. In 1999, Eskom wrote to the South African parliament, warning them about the increased demand for electricity and the urgent need to construct more power stations, but the Thabo Mbeki administration did not heed the warnings—at least not until 2007 when, as predicted by energy experts, the first nationwide rolling blackouts occurred. As a result, the government was obliged to acknowledge that Eskom was in the right: “Eskom was right, [and the] government was wrong,” said Thabo Mbeki on 12 December 2007.

Following this, the government instructed the construction of two additional power plants in Medupi and Kusile, projected to have a combined generation capacity of 9,564MW, but unfortunately these plants remain uncompleted to date.

Since the beginning of this crisis in 2007, there has been a frequent change in leadership at Eskom as a way of addressing the problem, but none of the CEOs has been able to successfully steer the sinking ship ashore. Instead of addressing these challenges, the CEO hot seat has turned into a stage for political mudslinging and conniving, as the entire nation is mired in uncertainty and plunged into darkness. Andre De Ruyter, the most recent casualty, resigned from his position at Eskom in December 2022 and gave a bombshell interview on South African television in February 2023 where he revealed the extent of the company’s fraud. De Ruyter, who began his career in the private sector, was widely recognized as an effective leader in bourgeoise quarters. A consensus in favour of fully privatizing Eskom emerged during his tenure in 2019, and the process to unbundle Eskom started to unfold. By doing this, the ANC government would wrap up a process that was started in 1983 when Eskom was corporatized.

South Africa’s turn to neoliberalism

How the ANC was able to bring down this power company less than 30 years after the apartheid regime lost power is one of the main mysteries that observers on the periphery still have been able to wrap their minds around. But the core of this appears to be the crisis of neoliberalism, which has been the ideology of the ruling party ever since they came to power.

The harsh 46 years of Apartheid in South Africa came to an end as the world experienced political upheavals in other climes. The fall of the Union of Soviet Socialist Republics (USSR) in 1991 and the triumph of the Western block had a significant impact not only on geopolitics but on economic policies adopted across Africa as well. The ANC, like many ruling parties in Africa, succumbed to the wave of neoliberalism. South Africa joined the World Trade Organization (WTO), as well as assigned a new General Agreement on Tariffs and Trade (GATT) in 1995, thereby committing to neo-liberal policies in the post-apartheid era.

Under the direction of the then Minister Jeff Radebe, the Department of Public Enterprises published a strategy framework on privatization in August 2000. An accelerated agenda for overhauling State-Owned Enterprises (SOEs) was unveiled. By the middle of 2001, 42 SOEs had completed restructuring arrangements that saw them either fully or partially privatized thanks to this policy and the general policy direction on SOE restructuring that came before it. The goal was for all SOEs to be eventually privatized by 2004. This policy named Eskom as a target for partial privatization.

Skyrocketing electricity tariffs

Since the beginning of blackouts, the economy has suffered, with the mining sector being one of the most severely impacted because it had to dramatically reduce production. When Eskom battled with limiting new generating intake for its strained capacity and had to ration outages on a distributed schedule, load-shedding entered the picture it was in early 2008.

As it is a modus operandi, whenever capitalism faces a problem, it shifts the burden to the working class who are then urged to tighten their belts and work collectively to save their “economy”. Evidence of this is seen in how due to Eskom’s decision in 2007 to move towards “cost-reflective” tariffs for consumers, the National Energy Regulator of South Africa  (NERSA) approved a price increase of 14.2% in electricity tariff, which was swiftly followed by another 13.2% increase. South African citizens emerged battered and bruised from these changes. Things have gotten worse since then; South Africans went from having the most affordable electricity prices in the world to the exorbitant prices they have today.

Since 2008, South Africa’s power rates have undergone a clear and abrupt inflation point. From 2007 to 2022, electricity rates jumped by 653%, while inflation rose by 129% over this same period. So, in 14 years, power tariffs quadrupled in real money terms. As if this weren’t enough, Eskom asked NERSA to raise tariffs again at the beginning of 2023. In January 2023, NERSA granted Eskom the permission to raise its rates by an average of 18.65% beginning on 1 April 2023.

With this latest policy decision of 2019 to unbundle Eskom, neoliberalism has been elevated to new heights. Eskom has been dismantled; Independent Power Producers (IPPs) who are effectively funded by Eskom have been brought on board; and private enterprises and municipalities have been permitted to generate their own energy. All of this is intended to weaken Eskom ahead of a declared reason for privatized electricity.

No end in sight

Neoliberal policies have failed the working people, not only in South Africa, but in far too many parts of the African continent and around the world, with its austerity measures (budget cuts to social services for the poor). The conflict between profit-based motivations and public interest is one of the main problems with privatization. One can predict that as a private business, Eskom and its partners will place a higher priority on making money than ensuring that everyone has access to affordable and dependable energy. Another challenge is the potential for monopolies or oligopolies to form in the electricity market. When a few large companies control the majority of the market, they may be able to restrict competition and set higher prices. This can be particularly problematic in countries where there is a lack of effective regulatory oversight or where consumers have limited options when choosing their electricity providers.

Furthermore, to add fuel to these challenges, there has been pressure coming from the global north countries on the question of zero emissions. Monies are being dangled in front of the leaders of these third-world countries to “save” the environment. In 2021, Germany pledged around €700 million (ZAR13 billion) to the South African government to decommission its coal-based power stations in order to transition to green energy. The folks who are currently leading the calls for decarbonization, however, are the same ones who immediately restocked coal after the Ukraine conflict broke out and Russia significantly reduced natural gas supplies to Western Europe. Ironically, the same South Africa they are supporting to decarbonize is where Europe gets its coal to utilize in its coal-based power stations. So, seemingly there is no end to this terrible comedy unless our leaders see the deceit in the decarbonization campaign.

To be sure, in the long term, there must be a shift to renewable energy sources, but for the time being, South Africa urgently needs more coal.

However, the transition to other energy sources must be a “just transition,” one that protects the jobs of those who work in the mining and electricity-generating industries as well as the communities whose livelihoods have historically depended on these industries. The public may be more receptive to energy reforms and activities that enhance sustainability and inclusion in the energy industry if fundamental issues such as poverty and inequality are addressed.

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