After Years of Blackouts, South Africa is Suddenly Keeping the Lights On

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(Bloomberg) — Aslina Wines, an independent winemaker nestled among the vineyards of Stellenbosch, is a big generator among its most valuable stock. It relied on the machine to stay running during South Africa’s worst power outages, which affected the country 332 days last year. The wine was lucky. As the power outages became more severe, suppliers without generators “were hit hard,” said Bradwyn Persent, operations and logistics coordinator at Aslina, as were many of the country’s struggling small businesses.

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Then, in March, the outages suddenly stopped. Even as the Southern Hemisphere enters winter, when electric heaters and early sunsets boost demand, Eskom, the struggling state-owned utility that generates most of South Africa’s power, has managed to keep the lights on.

It has now been seven months and counting since the last power outage in the country. Persent is pleased with the line, but has no plans to get rid of the generator. He added: “We are happy, but we are not comfortable.”

For many years, chronic power outages have hampered South Africa. First implemented in 2008, it costs the economy up to 899 million rand ($52 million) a day, according to central bank estimates, and was a big reason why the ruling African National Congress lost its majority in elections last June. Attempts to reform the corruption-plagued utilities have failed over the years, and a comprehensive privatization plan has collapsed; Efforts to increase generating capacity have been delayed and not fully achieved. Inside power stations, theft and vandalism have become more daring.

Now the situation seems to be stabilizing. The effects of recent and long-term reforms have radically improved employee morale, according to experts, analysts and officials, making a big difference in helping Eskom get back on its feet. The decision to postpone the retirement of three coal-fired power plants also played a major role.

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Malkoto Beza Mutobatsi, president of the National Union of Mineworkers in the Highveld area, where most of Eskom’s coal plants are located, said the move “brought confidence”. “The government has been able to listen to us.”

Eskom’s recovery began to attract attention in March, when it went week after week without a power outage. This happened when Dan Marucane took over as the company’s new CEO. He won support from Labor early on by calling for repairs to crippled power stations and revamping the company’s management structure — marking a break with previous leadership, whose focus had been on transitioning away from coal.

Meanwhile, a $14 billion debt relief plan took effect. Across the country, the proliferation of solar panels, a popular alternative to reliance on Eskom, has eased pressure on the grid. Coal theft declined as the price of the metal fell. Power plants were given permission to send parts to original manufacturers for repair, resulting in more reliable operations.

Efforts to suppress crime have also borne fruit. While former President Jacob Zuma’s government looted the company’s bank accounts, sabotage and small-scale theft at power stations spread. Contractors were known to steal and resell parts several times, and the thieves would replace entire truckloads of coal with stones. However, between April and August this year, a joint effort between the police, the National Prosecutor’s Office, the Revenue Service and a special investigation unit reduced crime by 28% compared to the same period the previous year.

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Law enforcement and court efforts have yielded “tremendous” results, said Lomkiel Mundi, an economist at the University of the Witwatersrand who has written extensively about Eskom.

Fragile recovery

It has been a long time since Eskom employees had reason to be optimistic. Not only was the company publicly humiliated every time the lights went out, but workers were also expected to work under nearly impossible conditions. Plants undertaking major reforms had parts stuck in complex processes, performance-related bonuses were suspended for years, and intimidation linked to corruption was common.

During a tour of Eskom power stations last year amid record power outages, Electricity Minister Kgosincho Ramokgopa realized that employees were simply not appreciated. “Before you could get to the engineering questions, you could see that there were cultural issues there, how people were beaten down and simply told that they were not capable,” he recalled during a press conference in Cape Town.

A group of German advisors brought in by the government to assess the situation reached the same conclusion. “The current crisis can only be overcome at power plants,” says the vgbe Energy eV report, describing plants run by unmotivated workers and training programs that have been forgotten or neglected.

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As business conditions improve and power outages stop at least temporarily, South Africa’s economy is expected to grow by more than 1% this year, which could help bring down the country’s unemployment rate of 33.5% – among the worst in the world. It could also help strengthen the coalition government that took power this summer after the African National Congress lost its majority.

Analysts had mixed reactions to the facility’s recovery. Eskom’s performance “exceeded our expectations,” Ryan Adams, an analyst at fund manager Allan Gray, wrote in comments to Bloomberg. Chidza Madzima, head of operational risk research at BMI-Fitch Solutions, described the company as “painting a bright picture at the moment”. But she warned that the facility is not expected to return to pre-pandemic production levels until 2027, and only if it gets strong support from Transnet, a state logistics company struggling with its own financial and operational problems, and if it can manage to lay a 14,000-meter transmission line. kilometers, a possibility she described as “absolutely improbable.”

Despite the challenges, Marucane, the new CEO, is looking beyond damage control and toward expansion. Eskom is currently looking for an executive to head its new clean energy division, and the company expects to deliver another 2,500 megawatts by March, Marukane said, the equivalent of a small to medium-sized power plant.

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In the best-case scenario, this could create a virtuous cycle. Eskom’s recovery will help fuel expansion in energy-intensive, job-creating sectors such as manufacturing in South Africa, noted Yvonne Mango, Africa economist at Bloomberg Economics.

Motubatsi, the union leader, said employees were optimistic for now. He said that getting through the winter without power outages for the first time in five years was a victory, and stressed the importance of coal plants. Emphasizing his group’s “full confidence” in the Eskom board and CEO, he struck a tone of optimism. “We believe these are the glory days for Eskom.”

-With assistance from Sthembile Cele and Janice Keogh.

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