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Corrupt Power Sector Strangles South Africa

When CEOs investigate corruption, including internal sabotage from suppliers who want more work, some may not want them around. Consider South Africa’s failed state power utility, Eskom, whose CEO André de Ruyter was treated for cyanide poisoning after drinking coffee in his office. It is now being investigated as an assassination attempt. The incident came the day after de Ruyter had tendered his resignation, effective March 31.

Mr. de Ruyter has been probing the corruption endemic to Eskom, Africa’s largest utility.

Despite vast reserves of coal, Eskom fails to provide reliable power and operates at 50 percent of capacity. South Africa used to have a well-functioning energy sector, the envy of Africa, but Eskom’s poor performance is now a problem for all the country’s residents and the South African economy.

One solution is to auction off power plants to private companies and allow them to compete to offer power. A profit motive would result in better performance. But privatizing the power plants that feed the grid is politically unpopular within the ruling alliance of the African National Congress (ANC), the Communist Party, and trade unions. Auctioning off power plants needs political support, which is not coming.

Instead, South African President Cyril Ramaphosa is shuffling the proverbial deck chairs on the Titanic by moving Eskom into the Ministry of Energy.

American Enterprise Institute senior fellow Desmond Lachman told me in an email, “The chances of real reform of Eskom are close to zero under ANC rule, as can be seen from the huge internal party difficulties that President Ramaphosa is having in trying to clean it up. The chances of it being privatized under the ANC are even less, given that this runs counter to the ANC alliance’s antipathy to the markets.”

Corruption in South Africa’s public sector was detailed in a series of voluminous reports by the Zondo Commission, led by Justice Zondo, the South African Chief Justice. Following investigations and hearings between 2016 and 2022, reports include 533 pages on Eskom, found here and here. It is alleged that Eskom gave contracts on favorable terms to the Gupta family, who have close relations with former South African President Jacob Zuma and ANC.

The sixth and final volume of the report recommended prosecution of the Guptas and former Eskom officials responsible for fraudulent contracts. Some Guptas are in Dubai, awaiting extradition to South Africa.

Load shedding, known in America as blackouts, has become a normal facet of life in South Africa. It even has predictable stages, ranging from Stage 1 (reducing power for two hours at a time over a four-day period) through Stage 8 (reducing power for 12 hours out of every 24). South Africans are angry about blackouts but must adapt.

Phone apps occasionally provide accurate information about blackouts. But some blackouts are unpredictable, due to cable theft or breakdowns, leaving families unable to cook dinner or use computers for children’s homework.

Without electricity, small businesses and farmers are left without refrigeration and must discount perishables for quick sale. People can show up at work and find that power is out, so they sit in offices unable to work, if they can reach their offices without operating elevators.

Municipal water gets cut off because pumps have no power. Raw sewage spewing into the sea spreads e-coli infections and forces beach closures.

Mr. Lachman said, “Eskom is riddled with corruption and has been badly managed for the past 25 years. South Africa is now suffering from the worst electricity blackouts on record, which is affecting the economy badly. Eskom’s problems are emblematic of what has gone wrong under the past 30 years of ANC rule which has come to be associated with a corrupt and incompetent State.”

Eskom has 45,000 megawatts of baseload in coal, enough to run the country, but power plants are poorly run and maintained. Generating all megawatts requires efforts to systematically repair power stations, starting with best-equipped plants and working through to the worst.

Maintenance requires deliberate load shedding while the power plants are down for maintenance. Putting the entire country on Stage 2—reducing power by 2,000 megawatts, 6 times over a four-day period for 2-hour stints—would enable power plants to be repaired. But because blackouts are unpopular, operators neglect in-depth overhauls.

Maintenance also requires a trained workforce, and South Africa’s technical workforce has dwindled. Foreign workers may be needed to complete repairs.

At its conference to elect new party leaders in December 2022, many ANC delegates expressed fear that Eskom’s woes might cost them the election in 2024. So far, no political party is running for office on the platform of improving electricity. No party has even made power generation central to a manifesto.

People celebrate when they only have minimal blackouts, and put up with the hardship, but public patience is being sorely tried. Eskom is an example of how corruption can suffocate initiative and drive an economy into the dust.

Source : The Heritage Foundation