IT is clear from any broad "cost-benefit" analysis of President Cyril Ramaphosa’s recent new Eskom energy measures that there are huge and overwhelming economic benefits in South Africa seeking to firstly keep the lights on as far as possible and, secondly, ending rolling power cuts within the next two years, if all the steps are properly implemented.
This is according to North West University (NWU) Business School economist Professor Raymond Parsons, who last week said it was known that the economic costs of past mistakes in energy policy in South Africa had been severe and the crisis situation had required urgent remedies.
“Lack of energy security has become the biggest single threat to South Africa’s economic performance. And to the extent that the private sector is now more heavily involved in power supply also means the costs and risks of its participation are for its account. Overall, for the economy as a whole the benefits of potential energy security are thus likely to greatly outweigh the costs,” Parson said.
On the financing side there were a few issues to highlight.
“Firstly, South Africa is drawing on promised external finance to help it with the ‘just transition’ towards a greener economy. A fund of money is already on the table and is pertinent to the latest announcement. The negotiations with the relevant countries are currently underway and we should have a clearer picture later in the year.
“Secondly, we will know in the October Medium-Term Budget Policy Statement (MTBPS) to what extent, and on what conditions, government may take over some (or all) of Eskom’s debt in order to give Eskom space to ensure more capacity.
"Thirdly, we must also keep an eye on Eskom’s current tariff application to Nersa.
"It therefore remains essential that as the process of reconfiguring South Africa’s power supply unfolds, both internally and externally, there is transparency about costs and financing, as well as accountability for the outcomes,” Parsons said.
BUSINESS REPORT