An energy indaba, similar to the much-mooted economic indaba, might be the route to go to resolve the “complex problems” of secure energy supply and high electricity prices, Minister in the Presidency for National Planning Trevor Manuel has proposed
At a business breakfast running alongside the ANC’s national conference in Mangaung yesterday, the minister was asked what the solution was to ever-increasing power prices, which were whittling down, rather than expanding, jobs in the manufacturing sector.
Manuel said the problems with Eskom were “unbelievably difficult” to solve, partly because “energy costs have been so low for so long”. The other challenge was that electricity generation was a carbon intensive industry, which was proving “exceedingly difficult” to change.
Pressed on whether there should be greater competition in generation, distribution and transmission, he said while there was a commitment to bring in independent power producers, they could not initially match the unit cost of electricity achieved by Eskom.
Noting the contradiction between the emphasis placed on promoting manufacturing in the National Development Plan (NDP) and the fact that the manufacturing sector was contracting because of recent electricity tariff hikes, Manuel said: “We need to talk to each other on these issues… no one wants to pay more for energy.”
Manuel acknowledged that the experiment to introduce regional electricity distributors (Reds) had failed “They did not work… we pushed the Reds back under the bed,” he joked.
He was referring to a network of planned Reds, of which only the first, Red One, was established covering the Western Cape and Northern Cape. However, it never properly got off the ground and municipalities continue to distribute electricity in areas where they are licensed to do so. Eskom serves the rest of the country directly.
Only about half of the 283 municipalities are licensed to distribute electricity. Red One was aborted amid challenges from municipalities.
Manuel said municipalities’ role in supplying electricity was an important issue in the power pricing outcome as they placed a surcharge on the Eskom price. “They use that as a revenue source, which adds to the cost… these are big issues.”
While many stakeholders in South Africa wanted an economic indaba to find common ground in meeting the financial and fiscal challenges facing the country, he believed that “maybe we need an energy indaba” to find solutions to these seemingly intractable problems.
The NDP, which was drawn up by the National Planning Commission chaired by Manuel, expressed itself wary of tapping into new sources of nuclear power if it proved costly. However, it was more amenable to the possibility of exploiting shale gas in the Karoo, which Mineral Resources Minister Susan Shabangu has pointed out could have potential reserves of 485 trillion cubic feet of gas.
Asked whether implementation of the NDP would receive a fillip with the election of businessman Cyril Ramaphosa as ANC deputy chief, Manuel said he had already been a “resonant voice” in publicly articulating the plan “in spite of all of his responsibilities”. He was referring to Ramaphosa’s business interests in Shanduka and Ivanplats and board positions at MTN and Lonmin, among others. “He has actually made an immense amount of time available for the work of the commission.”
Manuel said he was hoping to continue working both in the commission, which forged the NDP, “and outside of it”.
He said the commission, of which Ramaphosa is deputy chairman, had a five-year lifespan, but discussions would be held with President Jacob Zuma to decide whether an extension of the commissioners’ terms would be necessary. Such discussions were likely to take place early in the new year.
Meanwhile, Bloomberg reported yesterday that Ramaphosa, the chairman of MTN Group and Bidvest, was reviewing his business interests after being elected deputy president of the ANC.
“This is necessary to address any potential conflicts of interest and to ensure that I can adequately perform the responsibilities of this position,” Ramaphosa said yesterday. In September, Sunday Times estimated his wealth at R2.22bn.