‘Plug in private sector power’

Seifsa’s COO says government must drop dogma on energy and let business help

Tafadzwa Chibanguza, COO of the Steel and Engineering Industries Federation of Southern Africa (Seifsa), says the government needs to jettison its ideological hang-ups and open the floodgates to allow speedy and direct private sector involvement in solving the energy crisis.

“Open up the floodgates. All the way. It’s the only solution we have right now. The incentive for companies to come in and help to solve this is not profiteering, it’s sheer survival.”

Offers from Seifsa and other business organisations to assist with technical, electrical engineering and financial skills have been on the table for at least two years but “government hasn’t picked them up”, he says.

The only structure with the clout to bring in the private sector on the scale required is the interministerial National Energy Crisis Committee (Neccom) which is located in the presidency, but it is moving far too slowly given the urgency.

“The speed at which things are moving leads one to conclude that they’re still holding on to their old ideological position. But we’re already off the runway in terms of being in crisis mode, and crisis mode dictates that we do things differently. Put aside ideological positions.

“The current command approach where you close out the private sector has not worked. Now we have a crisis of such magnitude that it absolutely demands that we do things differently.”

Had government been more receptive to private sector offers of assistance “we would most likely not have found ourselves this far down the road in terms of the lack of energy availability”.

The government is more open to these offers now, he believes.

“I think the extent of the crisis has woken them up to the fact that the country is burning and they need this assistance.”

But there is an urgent need for Neccom to co-ordinate all the private sector offers of assistance, and this is not happening.

“You’ve got offers from Business Unity SA, Minerals Council SA, Seifsa etc, but coordinating these offers is crucial, and only Neccom can do that.”

At the moment offers of assistance “might land anywhere — at the department of trade, industry & competition, the department of minerals & energy, the presidency, even the department of public enterprises. There’s no evident co-ordination and often as a result no practical outcomes.”

He cites bid window 6 of the government’s renewable energy independent power producer procurement programme as a classic example.

Bid window 6 initially targeted 2,400MW. President Cyril Ramaphosa then announced this would be lifted to 4,200MW.

The private sector responded enthusiastically, with bids of 9,600MW, only to learn that the transmission system couldn’t handle anywhere close to that. In the end a disastrously insufficient 860MW was issued.

“That is just one classic example of the lack of co-ordination between what is announced and what is practical.” Offers being made by different sectors for different needs and different consumption patterns need to be co-ordinated by Neccom but this isn’t happening, he says.

“What we have instead is an almost complete lack of co-ordination in government.”

With proper co-ordination the bid window 6 “fiasco” would have been avoided.

“With more, or indeed any, co-ordination the issues of transmission limitation would have come up before the president made his announcement.”

Neccom is the structure that should have ensured the president was properly briefed, Chibanguza says.

“It sits in the presidency. The interministerial nature of the committee implies that it borrows energy expertise from across ministries, limited as that might be. So that structure should have signalled, before the president made his announcement, that there is an issue here.

“Lack of government co-ordination is the only thing that explains how an announcement such as this could be made without due consideration for what is happening on the transmission side.”

He finds such a lack of co-ordination from the body the president has put in charge of handling the biggest crisis democratic South Africa has faced “truly disturbing”.

“We can beef up this committee with a lot more private sector skill. The quid pro quo would be allowing the private sector to have a much more involved say in Neccom.

“It doesn’t have the best track record but setting up a new structure will take us at least three months down the line, and we don’t have three months. This crisis is immediate and needs immediate solutions.”

Seifsa represents 1,250 companies in the metals and engineering industry, which employs 371,000 people and accounts for 3% of GDP.

Both downstream and upstream companies in the industry are being hammered by rolling blackouts, he says. Downstream producers at least have the option of alternative sources from independent power producers.

Except that these alternative sources are not materialising fast enough for businesses battling to survive, because of the government’s failure to make it easier and quicker for independent power producers to come onto the grid.

While the lifting of the licence threshold from 10MW to 100MW was announced in July last year, painfully slow bureaucratic processes are making nonsense of attempts to implement these reforms any time soon.

“Shortening these bureaucratic processes is taking much longer than the crisis demands,” Chibanguza says.

This is another area where he believes Neccom is failing to deliver on the president’s promises, in this case to cut red tape and accelerate processes.

The consumption needs of the metal and engineering industry’s large, heavy, energyintensive upstream producers which run furnaces, foundries and steel mills are such that they cannot reduce their reliance on Eskom by more than 10%.

When Eskom asks them to “curtail” their electricity consumption by 30% at stage 6 load-shedding it means in effect they don’t have 30% of their energy needs for 24 hours, he says.

“This is absolutely devastating if you’re running large machines which are designed to work 24 hours at full load. The long-term capital costs for them are absolutely catastrophic.”

At stage 4 and above the whole ecosystem they depend on, which includes municipal services such as water, starts to crumble.

“We are now most of the time in that region and it is having a devastating impact on operations and balance sheets.”

More companies are declaring short time, meaning shorter shifts.

“This is a lead indicator of what will play out in employment figures. When companies declare short time it means they’re distressed.”

That is a euphemism for “in survival mode”, he says.

The command approach where you close out the private sector has not worked. Now we have a crisis of such magnitude that it absolutely demands that we do things differently