The Energy Crisis in South Africa: In Search of a Scapegoat

South African energy minister Gwede Mantashe has placed blame on the private sector for the ongoing load-shedding crisis, rather than acknowledging any wrongdoing by the ruling party. Mantashe claimed in an interview with radio station 702 that a lack of interest from private sector investment in new power plants was to blame for the crisis. However, it is disingenuous to blame the private sector for this situation when there was no policy certainty, no regulations, and no guarantee that they would be allowed to sell the electricity they produce and see a return on their investment.

Background

  • The government intended to open the energy sector to private companies, but it has flip-flopped on policy and failed to finalise any regulations on time.
  • A White Paper on the Energy Policy of the Republic of South Africa, written in December 1998, highlighted the forecasted energy deficiency and warned that timely steps needed to be taken to ensure appropriate strategies were implemented in time.
  • Government did not act with urgency, with the next supply-side decision only being made in 2004 and Eskom’s construction beginning just before the South Africa power woes began in 2007.
  • Another reason was that government wanted to break Eskom’s monopoly.
  • It is argued that indecision and paralysis in government policy have significantly contributed to load-shedding.
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Mantashe’s Claim

Mantashe essentially blamed private investors for the energy crisis, claiming that the government delayed building programmes because it banked on private investors to show interest after the Eskom Board said there would be an end to the electricity surplus by 2007. However, it is disingenuous to blame the private sector for this situation when there was no policy certainty, no regulations, and no guarantee that they would be allowed to sell the electricity they produce and see a return on their investment.

The White Paper

The scenario around government indecision started in 1998 with the Department of Minerals and Energy (DME) under Penuell Maduna producing a White Paper on the Energy Policy of the Republic of South Africa. Although the document warned of the energy deficiency forecast and that the decision on supply-side investments would probably have to be taken by the end of 1999, it took until 2004 for the next supply-side decision to be made. Eskom’s construction only began just before South Africa’s power woes began in 2007.

Conclusion

While it is true that the government intended to open the energy sector to private companies, it is also true that the government’s dawdling with policy meant private investors had no incentive to invest, and often found themselves ignored when they did. However, the notion solely blaming the private sector for the current energy crisis doesn’t hold, as a lack of policy certainty, bureaucracy, and Eskom’s history of corruption and mismanagement have all contributed. It is time for the government to move towards more consistent regulatory practices and pave the way to more substantial private investment in the sector.

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