When André de Ruyter became CEO of Eskom, South Africa’s state power monopoly, someone warned him that he was now head of the country’s largest crime syndicate. De Ruyter, who quit the role in December after three bloody years, says: “Looking back, I think maybe he was right.”
Eskom is a miniature study of what went wrong in South Africa. As an energy supplier who cannot keep up the light, he is gradually depriving the country’s economy of its lifeblood. It is rife with corruption, extremely inefficient and losing expertise every day.
Without reliable electricity, South Africa cannot generate the economic growth needed to tackle the problems of poverty and social injustice that are a smoldering legacy of apartheid. But the ruling African National Congress appears unwilling to reverse Eskom’s decline – and with it, South Africa’s slide into disaster.
South Africa is experiencing the worst power outages in its history. Eskom imposed at least 100 days of continuous power outages last year. The electricity often goes out for five, sometimes ten hours. Without power, factories stand still, meat rots in slaughterhouses and police stations are attacked under cover of darkness.
Yet far from addressing the problem, the government seems intent on prolonging it. The Treasury recently blocked the purchase of diesel to run emergency generators, even though it would have cost the economy a huge amount. Severe power outages are estimated to cost R4 billion (about US$235 million) per day in lost economic activity. The Treasury Department softened its objections to buying diesel at a fraction of the cost of lost production after De Ruyter quit. This suggests that his objections were political and not rational.
Even more inexplicably, up until six months ago, the government severely restricted the amount of (mostly renewable) energy private providers could put into the grid — the political equivalent of a ban on harvesting rainwater during a drought.
What could explain such insane decisions? The common thread is self-interest and the dysfunction of its political economy, born of South Africa’s deep racial divisions. In short, the ANC is willing to sacrifice the country for the benefit of a minority – in this case the coal industry and all sorts of followers.
During apartheid, coal was controlled by large white corporations. Since 1994, the Black Empowerment Rules have gradually transferred ownership to black South Africans, who now own more than half the industry. Unlike many other areas of the economy where whites have remained in control, coal has been a success story in redistributing wealth and opportunity.
But it comes at a price. The ANC is now reluctant to challenge the supremacy of coal, which the country uses for 85 percent of its intermittent energy. President Cyril Ramaphosa supports the transition to abundant solar and wind energy. But strong forces within the ANC oppose anything that threatens coal industry jobs. Many of them are concentrated in Mpumalanga province, where unemployment is even higher than the staggering national average of 34 percent.
Gwede Mantashe, a former miner turned energy minister, has declared himself a “coal fundamentalist”. He effectively prevented private companies – of which the ANC remains pathologically suspicious – from supplying large quantities of electricity, a position eventually overturned by Ramaphosa in July.
Coal’s established position was cemented by outright crime. When coal was dominated by a few large mining companies, power plants were built next to coal fields. Coal was transported on conveyor belts.
Now, as De Ruyter recently explained, it’s being transported from small mines, often hundreds of miles away. It can be stolen along the way. Good coal is sold abroad at high prices. Bad coal, including waste and scrap, is fed into power plants, reducing generating capacity and causing outages.
When De Ruyter tried to fix this and other problems, he was sabotaged from within – presumably by Eskom employees who profited from wrongdoing, including corrupt procurement. Like many state institutions, Eskom was “captured” during Jacob Zuma’s presidency, infiltrated by people willing to plunder the state for their private gain. It has not turned out to be easy to eradicate them.
There is a way to fix the power issues. It is about a massive increase in privately produced electricity and the loss of Eskom’s generation monopoly. Eventually, as coal supplanted Eskom, it would shrink and become a less powerful — and less plunderable — transmission company.
This is the roadmap that De Ruyter wanted to follow. His job has been made untenable. It is not clear whether the ANC has the courage to do the right thing. There are still some good people in Nelson Mandela’s party. But they drown in the swamp that will eventually swallow them all.
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