Fleet Financing

South Africa’s energy crisis worsens

On the morning of June 27, 2022, National Union of Mineworkers (NUM) shop steward David Fankomo joined his colleagues on the picket line outside Eskom’s Emalahleni office, in the heart of South Africa’s coal belt . Workers at Eskom, the country’s state-owned electricity company, have been embroiled in four rounds of wage negotiations with executives since April 2022. South Africa is energy-rich but is in the midst of power shortages in cascade. The Fankomo union is at the heart of this crisis: workers are pulling coal out of the ground but living on barely enough of its energy.

On June 28, Eskom announced that it was going to implement “Stage 6 load shedding” due to “unlawful industrial action”. “Load shedding” is defined as a rationing measure aimed at reducing the demand for electrical energy by imposing rotational power cuts when the supply of power stations is severely constrained. South Africa’s load shedding schedule goes from stage 1 to 8. Stage 8 represents a large-scale grid collapse. Stage 6 left parts of the country without power, in the middle of winter, for up to eight hours a day. Load shedding has become part of everyday vocabulary and one of the defining symptoms of post-apartheid state decay and political dysfunction.

Preparing for a collapse

The Eskom crisis offers a glimpse into the failures and trajectory of the ruling African National Congress’ national democratic revolution. The 1996 implementation of GEAR (Growth, Employment and Redistribution), a macroeconomic framework adopted by former President Thabo Mbeki, laid the foundation for the expansion of public-private partnerships as a service delivery model. This policy spurred reforms that initiated a massive deployment of prepaid electricity meters as a more aggressive means of collecting residential electricity payments. These changes were forced even with steadily rising electricity costs, compounding the introduction of new barriers to access for working-class users. In response, resistance came from workers and civil society, both of whom demanded an end to privatization.

Since GEAR, there has been a chronic lack of investment in new public generation capacity, leaving Eskom dependent on aging and poorly maintained coal-fired power stations.

Phakamile Hlubi-Majola, spokesperson for the National Union of Metalworkers of South Africa (NUMSA), told me that his union holds ‘Eskom responsible for the rampant waste of taxpayers’ money spent on excessive coal costs , diesel and independent power producers, while trying to cut worker benefits. Hlubi-Majola insisted that Eskom workers have yet to receive a significant pay rise in four years, but over the same period primary energy costs have risen sharply. As negotiations reached an impasse at the end of June 2022, a number of workers embarked on a protest action, independent of union sanction, to voice their anger and discontent.

No light at home

The South African government reports that more than one in three workers are now unemployed. This comes at a time when fuel and energy prices are skyrocketing. “The electricity goes out the moment the workers go home,” says Kashiefa Achmat, president of the Housing Assembly, a local civil society organization campaigning for “decent housing for all”. She adds, “Even the food we bought goes very quickly. Where we live when the cuts are at night it is very dark and dangerous to walk around in, especially for women. The gangsters wait for these opportunities; even the cables are stolen. Our telephone networks also become slow in the event of load shedding.

The use of wood and paraffin in urban households is common due to high electricity costs or complete lack of electrical connection. This is particularly prevalent in the townships due to a lack of tenure security of recently expanded informal settlements.

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Since the start of the COVID-19 pandemic and the April 2020 lockdowns, South Africa has been defined by hundreds of land grabs and service delivery strikes. Working-class communities have taken to the streets in continued efforts to force the government to fulfill its basic mandate, only to face police repression and the opportunistic use of special pandemic-related regulations to evade the ‘commitment.

Rob Peter to pay Paul

Under the current local government financing model, municipalities are obliged to generate profits on the provision of basic services to finance their operations, invest in new infrastructure and repay existing debt. In 2021, outstanding municipal debt owed to Eskom stood at over R35 billion, with at least 20 municipalities in default. This trend is largely a by-product of the flawed system of municipal funding and not the result of individualized instances of poor user behavior.

Eskom’s own debt levels have soared to around R400 billion. In a study carried out in support of the trade union movement, Eskom Transformed, the roots of debt came from three key areas. Predatory World Bank and IMF lending for the Medupi and Kusile coal megaprojects have both resulted in erratic spending and overruns. Increases in the cost of primary energy are mainly due to the purchase of expensive energy from private producers. Debt levels also came from dramatic increases due to the cost of coal from local suppliers.

Just Transition

Against the backdrop of this crisis, South Africa’s energy transition plans made international headlines following the 2021 UN climate summit in Glasgow. The UK, France, Germany and the US have proposed a Just Energy Transition Partnership Agreement with South Africa worth $8.5 billion, consisting of a mix of grants and loans still to be negotiated. The financing plan, backed by the World Bank and the IMF, aims to accelerate the closure of South Africa’s coal fleet and develop infrastructure conducive to the rapid deployment of renewable energy systems. The plan has been closely linked to another round of aggressive reforms aimed at restructuring the national energy system allowing for increased use of private power plants. These projects are already dominated by multinational energy companies, as well as stakes held by private equity firms, both largely located in Europe.

Komati Power Station, a 1960s coal-fired power station based in Mpumalanga, is the first generator to be decommissioned under the proposed plans. The station must be re-powered to use photovoltaic solar panels, gas turbines and storage batteries. NUM’s Fankomo, based on this very site, raised concerns with the media about the lack of worker consultation and uncertainty over the future ownership of the plant despite the impending closure date of September 2022.

Two paths are available to you. The first is that liberal technocrats will provide a market-driven solution, efforts of which have failed over the past quarter century. The other is that unions can channel building discontent into forcing a new social pact. Unions have called for building a mass campaign for a general strike demanding an end to privatization alongside a long list of historic demands to bring the economy under shared ownership and control.

This article was produced by Globetrotter.