Secret to miracle Eskom turnaround

The private sector has poured resources into improving Eskom’s performance, with 57 companies contributing to interventions at the utility’s power stations.

Individuals from these companies also worked over 9,000 hours over the past two years to support Eskom’s turnaround.

Over the past year, Eskom’s operational performance has improved remarkably, with South Africa entering its eighth consecutive month without power cuts. 

This improved performance has also saved the utility billions that would have otherwise been spent on diesel to run its peaking power stations. 

From 1 April to 22 August 2024, Eskom’s diesel expenditure was R3.59 billion, 75% less than the same period last year. This translates into R10.6 billion in savings for the utility. 

More broadly, Eskom’s improved performance has the potential to boost South Africa’s economy. 

Financial services firm PwC said the sharp reduction in load-shedding is one of the key factors improving investor sentiment towards South Africa. 

It is also a symbol of how partnerships between the government and organised business in South Africa can drive positive outcomes for the country in a short space of time. 

In March this year, when power cuts had not yet eased, the SARB expected load-shedding of 12,840 GWh in 2024, set to cost the country 0.6 percentage points of potential real GDP growth. 

In a statement on 19 September, the central bank reduced its estimates to 4,344 GWh and 0.1 percentage points, as South Africa appeared to have ended load-shedding. 

The private sector’s rapid buildout of renewable energy projects has given Eskom vital space to conduct maintenance and build reserves to be used during the evening peak. 

However, the main reason behind the apparent end of load-shedding has been the remarkable turnaround in performance at Eskom’s coal-fired power stations.

While much of this has been down to the work done by Eskom’s Group Executive for Generation Bheki Nxumalo and his team, the private sector has also played a significant role. 

The Joint Steering Oversight Committee (JSOC) was launched in June 2023 with the backing of more than 150 prominent business leaders and has since made a huge contribution to tackling key issues facing South Africa. 

In relation to Eskom and the need to tackle load-shedding, 57 companies supported interventions at key power stations with over 9,000 work hours.

The private sector’s increasing role in the South African economy is set to result in substantial economic growth, with further reforms unlocking billions in additional investment. 

The second phase of the Government Business Partnership was launched earlier this month, signalling a continued public-private working relationship under the Government of National Unity (GNU).

This phase is set to replicate the successful collaboration between businesses and the government in other areas of the economy, with a particular focus on logistics. 

Research from PwC indicates that physical capital, logistics, and access to electricity and water account for a quarter of all labour productivity in South Africa. 

The firm also said that if a set of reforms are implemented immediately, the country’s economic growth could reach 3.3% in 2025 and create 470,000 jobs. 

This is based on the assumption that Eskom can keep up its good performance and reach an Energy Availability Factor (EAF) of 75%, compared to the current 63%. 

In turn, PwC said this would require a total electricity-related investment of R23.3 billion next year. Creating a surplus of supply is vital to not only ensure reliability but ultimately reduce costs and enable the economy to grow without being constrained by a limited electricity supply. 

If the successful partnership between businesses and the government is replicated in the logistics sector, a further R4.7 billion in additional investment could be unlocked.

When coupled with concessions for private operation of key rail corridors, South Africa’s logistics network can be much more efficient. 

This will make the country’s exports increasingly competitive and unlock significant savings for mining companies that have increasingly turned to road freight to avoid using South Africa’s rail network. 

Importantly, the private sector also has a significant role in helping South Africa avoid its next crisis related to water shortages by financing infrastructure projects.

However, PwC said significant obstacles remain in the way of the country achieving these individual goals over the next twelve months. 

The firm also said it is vital to think about what South African needs to grow over the long tem and not just in the immediate future. This brings issues such as the country’s skill crisis to the fore. 

This article was first published by Daily Investor and is reproduced with permission.