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Eskom’s polycrisis implicates ANC leaders, foiling the West’s decarb ‘carrot and stick’

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Picture: ANA Files – Former Eskom CEO Andre de Ruyter had often bragged of a commitment to renewables, yet in the JETP’s first year, 2022, he added only a small amount of solar and no new wind generation to the grid, the writer says.

By Patrick Bond

Eskom presents a microcosm of what is now regularly termed an international ‘polycrisis’: interlocking, overlapping governance, financial, social, labour and environmental problems with such devastating implications that they cannot be solved discretely, one by one.

Beyond immediate loadshedding and the potential for grid collapse, over the long haul Eskom’s outsized contribution to climate crisis is the source of greatest consternation, especially given last weekend’s ANC National Executive Committee decision to keep a dozen massive coal-fired power plants puffing away long after their expiry dates.

Recall that to speed decarbonisation of what is by far Africa’s largest emitter of greenhouse gases, President Cyril Ramaphosa and former Eskom CEO Andre de Ruyter were offered a carrot and stick in late 2021 by the US, UK, Germany, France and the European Union: the $8.5 billion slightly-concessional Just Energy Transition Partnership (JETP) loan package incentive combined with the threat of harshly-punitive trade sanctions – the Carbon Border Adjustment Mechanism (CBAM) – against South Africa’s emissions-intensive exports.

But the rotting JETP climate carrot can no longer offset a painful sjambok consisting not only of CBAM threats to trade, but also hard-hitting Chinese and Western financial sanctions against coal-fired power. To Beijing’s credit, the main Cold-Turkey blow to Eskom’s coal addiction was Xi Jinping’s September 2021 refusal to finance any more such generation along the Belt & Road Initiative, immediately halting the proposed Musina-Makhado Special Economic Zone power plant (originally 4,600 MW).

Both carrot and stick are needed to change Eskom’s course, but pro-coal critics are correct to point out overwhelming hypocrisy in Washington, London, Frankfurt, Paris, Brussels and Beijing, given their worsening fossil addictions.

Still, to eat the carrot and avoid the sjambok, Eskom leaders must indeed at least pretend to try to retire coal-fired electricity early, as promised. But instead of providing a credible plan to invest in the massive renewable-energy so desperately needed, Ramaphosa last week openly committed to breathing life back into the coal skorokoros: “As we prioritise ending loadshedding, we will need to revisit our decommissioning schedule to balance energy security and our climate commitments.”

And from within Eskom, internal sabotage evident with JETP office manager Vikesh Rajpaul reversing his own mandate: “It doesn’t make sense to be shutting down units at coal-fired power stations when we have an energy crisis.” De Ruyter had often bragged of a commitment to renewables, yet in the JETP’s first year, 2022, he added only a small amount of solar and no new wind generation to the grid.

In this context, electricity minister Kgosientsho Ramokgopa last week announced: “We are looking at unveiling a mega bid window of over 15,000 megawatts of additional renewables.” But incredulity prevails, because with Eskom outsourcing its obligations, privatised renewable energy of only 6200MW was brought online since 2011. And from 2020-23, De Ruyter failed to build sufficient transmission lines to access the best coastal-windy and desert-sunny power generation sites.

Meantime, Eskom largely neglected the demand side, although Ramokgoba now wants to install at least ten million smart meters so as to automatically switch off household geysers, although when he tried to do so as mayor of Pretoria in 2016-17, his efforts were deemed illegal by the courts.

More substantively, the spokesperson for the main corporate electricity consumers in the Energy Intensive Users Group (EIUG), Fanele Mondi, last week suggested government should pay his guzzlers to stop consuming so much: “Is it possible that we would ask companies with operations that are struggling, to shut it down?”

In contrast, mining journalist Martin Creamer hopes for a technological fix, recently advocating on SAfm radio: “It is so important to get away from smelting” because it “takes up an enormous amount of electricity.” His hope lies in North West Province’s Sedibelo platinum hydrometallurgical processing, which “will use only 19 percent of our precious electricity compared with what is used for smelting.” For Creamer, ideally “all the other smelters will follow this and stop squandering our electricity.”

These power addicts shouldn’t receive taxpayer handouts, but the reverse: imposition of standard ‘polluter-pays’ liabilities for their greenhouse gas emissions, as an incentive to compel the EIUG to cease and desist squandering society’s scarce power supply.

After all, most EIUG firms’ income is sourced through depleting the country’s non-renewable natural wealth. They further drain the economy via overseas profit repatriation, including Illicit Financial Flows to tax havens, a practice so common in corporate South Africa that the international Financial Action Task Force recently imposed ‘grey listing’ – a form of banking sanctions – due to lax regulation at Treasury and the SA Reserve Bank.

Ramaphosa was himself guilty of this lucrative practice while a leading Lonmin investor a decade ago, according to the Farlam Commission into the Marikana Massacre.

If a cost-benefit analysis was done at Eskom, local businesses and ordinary people would be spared load shedding, and a huge swathe of the EIUG guzzlers switched off, with Just Transition opportunities given to their workers.

Internally, Eskom faces yet another labour crisis, as the three main unions – the metalworkers, mineworkers and Solidarity artisans – demand wage increases more than double the inflation rate. The former have repeatedly demonstrated a capacity to turn off the country’s electricity, for example in the winters of 2022 and 2018. Could these unions demands become more expansive, to incorporate alternative employment opportunities as part of a genuine Just Transition during decarbonisation, or will they remain pro-coal?

Finally, Tokyo-based Hitachi’s bribery of the ruling party is at the heart of Eskom’s financial and operational crises. The two largest coal-fired power plants, Medupi and Kusile, face massive Odious Debt repayments which a government committed to fighting graft would question.

In February, De Ruyter acknowledged the most significant act of Eskom corruption, one “that keeps on giving,” was when in 2007 Hitachi bribed the ruling party – while tendering for Medupi and Kusile boiler manufacture and installation – by gifting 25 percent of its local subsidiary to Chancellor House. Outgoing World Bank president David Malpass even admitted the institution’s financing of extreme South African corruption during 2017 US Congressional testimony about Bank graft.

To be sure, News24 journalists this week discredited De Ruyter’s efforts to root out fraud, given the “rogue, half-baked intelligence dossiers sold to the highest bidder by discredited information peddlers”. The dossiers’ tales of Russian sabotage, artificially-induced rioting sprees at power plants, and odd motives behind De Ruyter’s coffee poisoning last December were thriller-novel material.

But the most extreme case – Hitachi’s bribery of the ANC’s Chancellor House – is not fiction. In January, News24 revealed previously-secret US Securities and Exchange Commission information that in 2015 led to successful Foreign Corrupt Practices Act prosecution of Hitachi, and that logically should kick-start a long-overdue local investigation.

De Ruyter testified to Parliament on Wednesday about the “trail of evidence” in which a prior 2007 procurement award to Alston “was rescinded due to influence that was exerted by the board and people close to the board”.

The chair of Eskom’s board at the time was ANC Finance Committee member Valli Moosa, now Presidential Climate Change Commission leader. In 2009-11, Public Enterprise Minister (then Finance Minister) Pravin Gordhan arranged Medupi-Kusile funding, and current Eskom chair Mpho Makwana operationalised the deal as chair and Acting CEO.

De Ruyter explained the graft: “The design of the boiler specification for Alstrom was adjusted to reflect the boiler height, inappropriately low. A similar design modification was not made to my knowledge to the boiler design, and therefore, when the tender that was awarded to Alston was rescinded, and subsequently awarded to Hitachi, the Hitachi-Chancellor House joint venture then did not take into account these modifications.”

Kusile’s October 2022 chimney-duct collapse, knocking out three units and 2400MW of power – 2 ½ stages of loadshedding – was one result.

Another, according to public interest lawyer Paul Hoffman, was that “The ANC made R5 billion out of the deal. What other political party in South Africa is able to find funding of such a scale, and so illegally, with complete impunity? In what other country that regards the rule of law as supreme does the criminal justice administration do so little to address the criminality obviously involved in the rape of Eskom?”

These hard-to-hear questions probably require a decisive answer: a home-grown Arab Spring to sweep out the old guard, and finally introduce energy justice.

Patrick Bond is Professor of Sociology at the University of Johannesburg.