Spectacular corruption to blame for South Africa’s power crisis

The answer to the following two questions is the same. Which country has the highest inequality in the world? Which country will see inequality increase the most in the next year? The answer is South Africa: a land of milk and honey where the gap between rich and poor is grotesque and will only grow. And the reason is simple: total mismanagement of the power sector that has led to the euphemistic “load-shedding” where power from the national grid is managed so that everyone experiences somewhere between 6-10 hours of power cuts every day. The cause of load-shedding is simple: spectacular corruption within the state power provider, Eskom, and the ruling ANC. This has left South Africa roughly 10 Giga Watts (GWs) short of the power that it needs to get life back to normal.

For context, 10 GWs is roughly a quarter of the UK’s grid capacity so the crisis in South Africa isn’t going to be over any time soon. Bringing that amount of power back to the national grid will take time, effort, capital and reform and in the meantime? If you’re rich in South Africa, the crisis is inconvenient at worst: you will have installed solar panels previously or, at the very least, battery storage. If you’re not quite so rich, you will have a diesel generator that might be noisy but will keep the fridge and the wi-fi going. If you’re poor, you won’t have anything and, as the power goes off and your fan stops working, the mosquitoes will get to work.

I was in South Africa last week on business staying at a good hotel in Cape Town whose diesel generator had broken down. I had a very small window, then, into what it’s like to live by load-shedding and, truthfully, it’s discombobulating even for just a few days. A lack of access to reliable power saw me and my colleagues adjusting our schedules to make sure that we could have meetings with reliable power access and that we didn’t have to go to brush our teeth and go to bed using our Iphone torches. We were woken up each night at 2am as the mains power came back on and every light and alarm sprang back into life. This is hardly a life of hardship but I can extrapolate our own trite experiences to see how wearing load-shedding must be for the wider population when it goes on for month after month. 

Here in the UK, we have looked over the edge at various times this winter at what power shortages might look like but National Grid have done a spectacularly good and largely unnoticed job in keeping the lights on both in our homes and, crucially, within our industries. In South Africa there’s no such luck as industries that don’t have private provision of power are forced to work with whatever Eskom can give them. It’s no surprise then that the South African economy is shrinking – Capital Economics thinks the South African economy contracted by 1.3% in Q4 2022 – and is shrinking fast. Furthermore, as well as being a vastly unequal country, youth employment in South Africa is at catastrophically low levels. Of the 10 million South Africans aged between 15 and 24, less than 1 in 4 has a job and, without reliable power, that’s not going to improve any time soon.

In response to these problems, President Ramaphosa has both declared a national state of disaster and appointed an Electricity Minister, Kgosientsho Ramokgopa, whose early statements suggest that he does grasp the scale and existential nature of the crisis in South Africa. Furthermore, the crisis is so great that it will lead to fundamental change within the energy sector with Eskom likely to be wholly reformed and private provision within the grid making up most of the 10 GW gap. After all, South Africa has a spectacular amount of wind and solar resources which are just begging to be used if the grid can add the required capacity and transmission alongside power plants. In truth, the power plants are the easy part – it’s grid capacity and transmission networks, unglamorous though they are, that are the real keys to success.

In the end, the causes of the problem are so clearly about criminal individuals, including Ministers, enriching themselves at the expense of the whole nation that the President and his Government have no option but to make sure the crisis is solved and that this criminality is ended and punished. Retribution is coming. But retribution is also likely coming for the ANC too as they face elections in 2024. In the last elections in 2019, they won 57.7% of the vote and 230 seats in the 400-seat National Assembly. It’s possible that conservative, rural voters come to the ANC’s rescue in 2024 as they have in the past and keep their vote above 50% but it seems unlikely.

It’s at this moment that things become very tricky for South Africa because the most likely coalition partner for the ANC is Julius Malema and his Marxist-Leninist Economic Freedom Fighters (EFF) party. If you’re a youth voter who’s never been employed, it’s not hard to see why you might be inspired by Malema’s vicious – and it really is vicious – oratory and anti-business programme. Perhaps the ANC will be able to go into coalition with another of the smaller parties because Malema’s price for entering government will be high (goodbye, private sector involvement in anything) and the chances of any coalition lasting are precisely zero given Malema’s addiction to both publicity and inflammatory rhetoric. But Malema’s influence will be felt: in 2014, the EFF won 6.35% of the vote and in 2019 they won almost 11%. Given the events of the past two years in particular, it’s very hard to see any circumstances in which the EFF vote doesn’t increase and, if it does increase, it will be at the expense of the ANC. If you were an international power company minded to invest in South Africa but could see Julius Malema in office at the end of next year, you would likely take that investment elsewhere which suggests, in turn, that South Africa’s power problems won’t be over any time soon or, indeed, any time after that.

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