A most welcome change of pace
The report card for SA’s second-quarter GDP performance was always going to be dire and serve to remind us of the size of the challenge we all have in rebuilding the economy in the aftermath of the Covid-19 pandemic — and rebuilding it not into what it was before we headed into this crisis but recasting it so we finally get onto a much higher growth and employment trajectory.
In facing up to this challenge, it was encouraging to see the urgency with which President Cyril Ramaphosa addressed our economic plight. His urgency was backed by the announcement from the department of mineral resources and energy that the National Energy Regulator of SA (Nersa) had set in motion plans to add about 11,000MW of additional power to our strained grid from 2022.
Nersa’s move is the most integral regulatory step we needed as we restructure our electricity market for the future sustainability and health of the economy.
It will open up an artery of growth in the SA economy that we have never fully capitalised upon. Simply put, without a reliable and cost-effective electricity supply, higher levels of growth are not attainable.
There are businesses that already generate electricity for their own consumption and several of these have additional capacity that could be fed into the grid. Others, when allowed, will be able to create generating plant quickly, either for own use or for feeding onto the grid. All they’ve ever needed is the green light.
There is an estimated 2GW of power generation that lives outside Eskom, just waiting for the right signatures from the state. I’ve laboured on this point for maybe too long, but in the context of a global economy that will be under a cloud for years to come due to the Covid-19 pandemic, we have to find a uniquely SA solution to restore confidence and in turn stimulate growth. Bringing on board additional capacity from the private sector and not from a fiscally constrained Eskom and Treasury may be a trigger to that solution.
SA miners have long asked for government permission to set up their own independent power sources. Sasol uses only half of the 140MW capacity of its gas engine power plant. The rest was intended to be fed into the grid but it has never been able to successfully be connected.
There is also excess capacity in the 64 existing renewable energy independent power producers (IPPS). The power purchase agreements through which Eskom acquires energy from these producers doesn’t allow for their excess capacity to be fed onto the grid. A simple change to these contracts would allow this — estimates of the excess capacity range from 30MW and 280MW.
The IPPs that are already in operation can expand capacity with relatively little additional development as all grid connections and other infrastructure is in place. An expedited procurement round in which all existing projects are allowed to bid to expand capacity could create rapid expansion of supply at costs lower than new projects would incur.
Enabling much of this embedded generation onto the grid could happen quickly — and we need that desperately. A little further out, the renewables sector has historically shown it can procure new plant quickly and on budget. A solar plant can be constructed in 12-18 months while wind plants can be operational 18-24 months.
We do have options to deal with our generating challenges. It is in no way a hopeless situation that I know it sometimes feels like when we have weeks of load-shedding and know that more will come.
This week’s steps are positive signs that Ramaphosa’s administration is rising to the challenge that must form part of the economic recovery plan scheduled to be announced within the next three weeks. It’s a deadline that, given the president’s fastidious attention, will be met, we are in no doubt. And it is something that his members of cabinet need to embrace.
The delay of the spectrum auction by the Independent Communications Authority of SA (Icasa) from the end of September to March was disappointing. It’s a process that has been awaited for the past 15 years and has held up the spread of broadband access across the country at lower costs.
Our impatience is shared by Ramaphosa, who voiced his unhappiness this week, calling on communications minister Stella Ndabeni-Abrahams to speed up the process. “We cannot keep the economy in limbo for another six months,” the president was quoted as saying.
This strikes a positive tone, reflecting that his administration recognises the urgency needed to address the economy’s problems. All departments and regulatory bodies such as Icasa need to follow the example set by the department of mineral resources and energy and Nersa.
It is doable.
This piece was first published in Business Day.