The people of South Africa are living through very difficult times, full of frustration, uncertainty and darkness, in the truest sense of the word. All of this was due in large part to the collapse of the once powerful and respectable national electricity system, managed by the century-old state-owned Eskom, which generates 95% of the country’s electricity. Eskom has been imposing controlled cuts since 2012 and continuous blackouts since 2017, even for 12 hours a day throughout the national territory.
The damage to the economy was immense and severe. According to the Reserve Bank of South Africa, power outages cost the country R899 million a day, about $50 million. This means a negative impact of at least 2.5% on national economic growth, which will only be 0.3% in 2023. Add to that Eskom’s total cumulative national debt, which is estimated at $18,000 million, or 4.2% of 2022 gross domestic product.
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Very few sectors of the economy could be saved from the energy collapse. One of these is alternative renewable energy (solar and wind), but their impact on the national energy supply and consumption is too small to sound a trumpet.
Various reasons are given to justify the Eskom debacle: exponential growth in demand, forced brain drain of executives and specialized technical personnel, aging plants and equipment, precarious maintenance and low investments in new plants and grids, politically subsidized energy, deficit tariff system and enormous municipal debts.
Very few sectors of the economy could be saved from the energy collapse. One of them is alternative renewable energies, but their impact on the national energy supply and energy consumption is still very small.
All of these reasons sound plausible. However, there is a national public consensus that the causes of the energy catastrophe must be located much deeper. The task provides insights such as Eskom’s monopolistic nature and its reluctance to compete with private energy companies; the dreadful leadership of the corporate conglomerate and the poor management and governance of an excessive, ostentatious and gluttonous bureaucracy; the lack of capacity and technical experience of young engineers and operators; permanent theft and sabotage in installations, devices and networks; the presence of cartels and criminal mafias of contractors and suppliers of equipment, spare parts and supplies; or the constant interference of high political hierarchies of the majority ruling party and the ministers themselves in bidding and contracting and in the general management of the company.
Corruption in Eskom peaked during President Jacob Zuma’s two terms in office (from 2009 to 2016), Judge Raymundo Zondo’s commission underlined in its final report presented in April 2022. This commission was set up by the current government, President Cyril Ramaphosa, to investigate allegations known in South Africa as “state capture, corruption and public sector fraud”. In essence, the investigation revolved around the punitive ties between the Zuma government (the majority party) and the Gupta firm, a family clan of Indian-South African descent that signed fraudulent $5.3 billion contracts with the state. Eskom’s looting totaled about $1.4 billion, nearly a quarter of the total fraud under investigation.
But the corruption conspiracy did not end with the departure of the Guptas (who are now on the run from justice and facing extradition). According to Eskom’s recent CEO, thefts by other active criminal cartels now total $52 million a month.
The energy crisis is now being presented as the number one issue on the national public agenda, with government actions such as declaring a national state of emergency, appointing a Minister of Energy and organizing a National Board on Energy Crises.
Corruption in Eskom had its heyday during the two terms in office of President Jacob Zuma
This all sounds very good, but little or nothing is known about the plan to eliminate the blackouts altogether in terms of time, phases and costs, and certainly nothing about dismantling criminal networks and criminalizing those responsible for the Those responsible for the crisis are still operating with impunity inside and outside of Eskom.
Eskom’s recent dark history – it was named the World’s Best Energy Company by the Financial Times in 2001 – is just one example of the collapse of South Africa’s public economy, which is threatening many strategic public companies and government entities. According to the Zondo report, the Guptas’ network of business and political corruption caused damage to public assets equivalent to 1.4% of GDP in 2014.
The energy crisis is the manifestation of two very serious phenomena that are now marring South Africa’s meritorious transition to democracy: the takeover of state by the majority ruling party for three decades and the takeover of state-owned companies by a few lucky elites. Politicians who got a disproportionate amount of it have enriched themselves as a result. In this context, the Zondo Report should be read – beyond its specific recommendations – in two ways: as an invitation to deep reflection on the current state of South Africa’s democratic transition and its future; and as a necessary overhaul of the social contract and post-apartheid transitional model. All of this will determine whether Nelson Mandela’s flame will last or die out.
Jairo Morales Nieto, Doctor of Economics from the University of Munster (Germany) is a professor and author of books, essays and newspaper articles on economics and international politics. For 25 years he was an expert and senior official at the United Nations in America, Europe, Asia and Africa. Advised the government of South Africa in the early phase of the post-apartheid transition. He currently resides in Cape Town, South Africa.
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