— 01/31/2008
ENERGY CRISIS WILL BLOCK NEW PROJECTS

ENERGY CATASTROPHE
Extract from Sunday Times editorial.
 
PRESIDENT Thabo Mbeki, his Minister of Public Enterprises, Alec Erwin, and Jacob Maroga, the head of the state power company, Eskom, must take real responsibility for the catastrophic blackouts that have hit South Africa. Mealy-mouthed apologies for policy mistakes are not enough. Though we appreciate the openness with which Eskom management has dealt with the matter, we are concerned that Maroga does not seem to understand the urgency of the situation or its dire consequences for business and the people of South Africa. On Friday 25 January, while the power company was pulling the plug on the mines, he reportedly said he was unaware that they had closed. Yet, the previous day, Eskom at short notice  had sent a letter to mining companies and other major business clients telling them that the power utility was cutting their supplies - and it would not be held responsible for the consequences.
 
Eskom does not seem to be able to manage or alleviate the crisis into which it has plunged the country. Properly scheduling and implementing the rolling blackouts seems to be beyond it. There is no sense of urgency in its efforts to maintain its generating capacity or to build more. There is no proper explanation for how 25% of its generating capacity could disappear. And the only hope that this stumbling organisation can hold out for the country, is that it will be able to build enough power stations by 2014. Erwin - the minister in charge of Eskom - must be among the last to realise publicly that there is a crisis. The dismal stopgap plan that the Cabinet announced yesterday should have been put in place in 2006, when it became clear that economic growth was outstripping Eskom’s capacity to generate power and when the country was first being hit by blackouts.
 
Mbeki, protector of the ineffectual
Now, when the economy is being shut down and jobs and economic growth are being lost, and while foreign investors are being told to come back when South Africa has power, Erwin is introducing efforts to reduce electricity consumption. He now wants to make the blackouts more predictable, something that all South Africans who have been trying to live and work have been asking for since the crisis began. On top of these two - tolerating this ludicrous state of affairs - sits Mbeki, protector of the ineffectual. Mbeki's government has had clear tasks in the years it has wasted in power: grow the economy, create jobs and improve the living standards of South Africans. Many of the opportunities to boost the economy and generate jobs, created by the careful management of government finances, have been wasted by ineffectual ministers. Now there has been a catastrophic failure that is costing the country hundreds of millions of rands every day and stunting economic growth.  Mbeki allowed his ministers - including Phumzile Mlambo-Ngcuka, now deputy president, and Transport Minister Jeff Radebe - to drag their feet and let the situation spiral out of control.  Those who created this crisis must be held responsible. But it is clear that they do not have the capacity or political will to resolve it.

ERWIN’S ASSURANCES RUBBISHED BY ECONOMISTS, COSATU
Tamlyn Stewart
Sunday Times online (29/1/2008)
 
Economists are making a mockery of the assurance by Public Enterprises Minister Alec Erwin that economic growth could continue at healthy levels, despite severe countrywide power cuts. Investment Solutions chief economist Chris Hart and Econometrix chief economist Azar Jammine yesterday contradicted Erwin, who made his comment as the country's major mining houses shut down production because of the disruptions. Hart warned that Eskom's cuts could slash South Africa’s economic growth to below 3 percent this year - which would be the lowest level since the advent of democracy in 1994. Infrastructure projects that are fuelling economic growth are being derailed by Eskom's inability to supply sufficient power. 'Economic growth could even dip below the 3 percent level,’ Hart told The Times. South Africa achieved an economic growth rate of 5 percent last year. Hart’s warning came as Anglo American was knocked into second place on the Johannesburg Stock Exchange's Top 40 index by investors running for cover. The mining sector suffered major losses, closing 4 percent down on the day.

SA 'closed to new industrial projects until 2012'
Jammine said he expected growth to slow to 3.4 percent this year due to slower fixed-investment growth, which he blamed on Eskom. 'People have basically lost confidence in being able to implement projects within the next five years if they are unable to have the power to complete them,' he said. Eskom says South Africa should be closed to new big industrial projects at least until 2012, when electricity supply is expected to improve. Bongani Nqwababa, Eskom’s finance director, said earlier this month that the power utility had recommended to the government that South Africa should be marketed only from 2012 for both local and foreign projects. It was inappropriate to advertise the country as an investment destination with low-cost electricity, he said.
 
'Virtually impossible' for unemployment reduction
Jammine said year-on-year job growth reached 193,000 jobs last year, when the economy grew by 5 percent. But with economic growth of 3 percent, or even less, 'we’ll be lucky to create even 100,000 new jobs for this year. And as 368,000 students passed matric last year, there’ll be virtually no reduction, if not an increase, in unemployment,' he said. The government’s goal is economic growth of between 4 percent and 5 percent a year until 2010, followed by growth of 6percent or more from 2010 to 2014. It hopes this will halve unemployment from 26 percent to 13 percent by 2014. 'Now it looks virtually impossible for government to achieve that goal,' said Jammine.
 
Cosatu warns of threat to 'millions of jobs'
Platinum miner Implats said it had not resumed production yesterday. 'We just had people undergoing safety and maintenance work,' said spokesman Bob Gilmour. 'We’re meeting with Eskom daily.' Asked when production was expected to resume, Gilmour said: 'We just don’t know.' Trade union federation Cosatu has warned mining houses that retrenchments must be negotiated with the unions. 'The Eskom power cuts are already a national embarrassment,' said spokesman Patrick Craven. 'Cosatu is seriously concerned that the crisis could deepen, as there is now a potential threat to millions of jobs as a result of the continuing power cuts.. The unions will oppose any retrenchments'.

CALL FOR MINISTERIAL RESIGNATIONS
The opposition Democratic Alliance says it is seeking accountability for the current electricity crisis. Hendrik Schmidt, MP, said 'the crisis is a reality. It is possibly the single biggest challenge to continued economic growth since 1994.  We understand that international companies as early as 2002  informed Eskom that the government's projections for the future supply of power were incorrect, having regard to the economic growth and ageing power stations.

'The mining sector continues to be a major driver of economic growth and job creation, and if the situation is not proactively managed then an industry that contributes both directly and indirectly 18% towards our GDP and employs over 400,000 people will be under threat, with disastrous consequences for all South Africans. No political leader in government has explained  the cause, full extent and expected duration of the crisis. When government adopted the 1998 White Paper on Energy, it was informed of the impending power crisis and that South Africa would run out of electricity by 2007. Why would any international or local company invest in power generation in a country where the returns arguably would be the lowest in the world. 

'The Democratic Alliance calls on the former Minister of Minerals and Energy, currently the Deputy President, as well as the current Minister of Public Enterprises, to resign with immediate effect. Failing to do so, places the task on the president to remove them from office'.