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Treasury gives Eskom room to find its spark

Eskom’s managing director for transmission, Segomoco Scheppers, says the next five years are very critical for security of supply. Picture: Ian Landsberg/African News Agency (ANA)

Eskom’s managing director for transmission, Segomoco Scheppers, says the next five years are very critical for security of supply. Picture: Ian Landsberg/African News Agency (ANA)

Published Oct 30, 2022


Finance Minister Enoch Godongwana has justified the government’s taking over a significant portion of Eskom’s debt as a major structural reform to deal with electricity supply bottlenecks.

The government says it will take over between one-third and two-thirds of Eskom’s current R400 billion debt in a bid to ensure reliability of electricity supply and the financial health of the state company.

Godongwana on Thursday said Eskom’s electricity supply challenges accounted for as much as 40% of South Africa’s economic underperformance.

He said the government must implement structural reforms in haste, as expenditure enabled by the commodity cycle windfall cannot be sustained for much longer.

“If at Eskom we can move on plant performance and make sure that we can have reliable electricity, the Energy Availability Factor is improved, that changes the game because we will, to some extent, have some reliable electricity supply,” Godongwana said.

“Researchers have done a paper for us which says 40% of our [economic] under-performance is because of electricity supply.”

Godongwana was addressing a virtual panel discussion hosted by Daily Maverick and sponsored by Citadel to unpack his Medium-Term Budget Policy Statement (MTBPS) tabled on Wednesday.

Eskom has this year implemented the worst bout of power cuts in the 15 year history of load shedding in South Africa, as its ageing coal-fired plants experience frequent unplanned breakdowns and emergency reserves run out.

In the MTBPS, the national treasury forecast that government revenue will exceed its spending aside from interest payments for the first time in 15 years by the end of 2023/24 financial year.

The treasury said the government will use some of the higher-than-expected tax income to reduce its borrowing.

Revenue collection has exceeded projections this financial year, and the gross tax revenue estimate for 2022/23 has been revised up by R83.5 billion to R1.68 trillion, largely due to improvements in corporate income tax collections, with strong receipts from the finance and manufacturing sectors.

The better-than-expected revenue collection estimates, including over the medium term, have allowed the government to narrow the deficit and mitigate lingering and new risks.

Meanwhile, Eskom revealed on Thursday that approximately 53GW of new additional generation capacity, particularly from renewable energy sources, including wind and solar, will be required for the period up to 2032 to ensure energy security in the country.

This is a significant revision of the Transmission Development Plan (TDP) 2021, which based its assumptions for new generation capacity on the Integrated Resource Plan of 2019 (IRP2019), which proposed around 30GW of new capacity by 2030.

The updated TDP takes into account the deterioration of the energy availability factor of the Eskom coal fleet, which was a key factor in the drafting of the IRP2019.

Accommodating this increased generation capacity means that a reliable and adequate transmission system is required to integrate and dispatch this new capacity to the load centres across the country.

Eskom’s managing director for transmission, Segomoco Scheppers, said the next five years were very critical for security of supply.

Scheppers said a significant investment of R72.2 billion would be required to expand and strengthen the transmission grid over the next five years if the TDP 2022 requirements to deliver an adequate transmission network capacity by 2027 were to be met.

“Of this amount, R50.8 billion is required for new capacity expansion projects to meet the reliability requirements, connection of new generation capacity and loads, as well as to acquire servitudes,” he said.

“A further R21.4 billion is required to refurbish the existing asset base and procurement of production equipment.”