Corrupt, failing Eskom is a picture of South Africa in miniature

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Eskom is a study in miniature of what has gone wrong with South Africa. A power utility that cannot keep the lights on, it is gradually draining the country’s economy of its lifeblood. It is riddled with corruption, desperately inefficient and daily losing expertise.

Without reliable power, South Africa cannot generate the economic growth needed to tackle the problems of poverty and social injustice that are a festering legacy of apartheid. Yet the ruling African National Congress appears unwilling to reverse Eskom’s decline — and with it South Africa’s drift towards calamity.

South Africa is experiencing the worst power cuts in its history. Eskom imposed at least 100 days of rolling blackouts last year. Power is often down for five hours, sometimes 10. Without electricity, factories grind to a halt, meat rots in abattoirs and police stations are attacked under the cover of darkness.

Yet far from addressing the problem, the government seems bent on prolonging it. The Treasury recently blocked the purchase of diesel to run back-up generators despite the massive cost to the economy of not doing so. Severe power cuts cost an estimated R4bn (about $235mn) a day in lost economic activity. The Treasury softened its objections to buying diesel, at a fraction of the cost of lost output, after De Ruyter quit. That suggests its objections were political, not rational.

Even more inexplicably, until six months ago the government was severely restricting the amount of (mostly renewable) power that private providers could feed into the grid — the policy equivalent of banning people from collecting rainwater during a drought.

What could possibly explain such insane decisions? The common thread is vested interests and the dysfunction — born of South Africa’s deep racial divide — of its political economy. In short, the ANC is prepared to sacrifice the country for the benefit of a minority — in this case the coal industry and assorted hangers-on.

Under apartheid, coal was controlled by big white-owned businesses. Since 1994, black empowerment rules have gradually transferred ownership into the hands of black South Africans, who now own more than half the industry. Unlike many other areas of the economy, where whites have maintained control, coal has been a success story in terms of redistributing wealth and opportunity.

But it has come at a cost. The ANC is now reluctant to see any challenge to the supremacy of coal, on which the country relies for 85 per cent of its sporadic power. President Cyril Ramaphosa supports a transition to abundant solar and wind power. But strong forces within the ANC oppose anything that might threaten coal industry jobs. Many of these are concentrated in Mpumalanga province, where unemployment is even higher than the horrendous national average of 34 per cent.

Gwede Mantashe, an ex-coalminer and now energy minister, has declared himself a “coal fundamentalist”. He effectively blocked private companies — of which the ANC remains morbidly suspicious — from supplying large quantities of power, a position finally overruled by Ramaphosa in July.

The entrenched position of coal has been solidified by outright criminality. When coal was dominated by a few big mining companies, power stations were built next to coalfields. Coal was transported via conveyor belts.

Now, as De Ruyter recently explained, it is trucked from small mines often hundreds of miles away. On the way, it can be stolen. Good coal is sold abroad at a premium. Bad coal, including discard and scrap metal, is fed into power stations, reducing generation capacity and causing breakdowns.

When De Ruyter tried to fix this and other problems, he was sabotaged from within — presumably by Eskom employees profiting from malpractices, including corrupt procurement. Like many state institutions, Eskom was “captured” during Jacob Zuma’s presidency, infiltrated by people prepared to ransack the state for private gain. It has not proved easy to root them out.

There is a way to fix the power problems. It involves a massive increase in privately produced electricity and a loss of Eskom’s generation monopoly. Eventually, as coal is superseded, Eskom would shrivel away to become a less powerful — and less lootable — transmission company.

This is the road map De Ruyter was trying to follow. His job was made untenable. It is not clear that the ANC has the stomach to do what is right. There are some good people still in the party of Nelson Mandela. But they are drowning in the swamp that will eventually swallow them all.

Source: Financial Times