Bringing power to the people

Only a small minority of southern Africa`s 100 million people enjoy the advantages of electricity. Beset with problems of war, poverty and economic instability, in reality the region has more urgent priorities than electrification. Nevertheless the Southern African Power Pool (SAPP) has achieved important breakthroughs by improving communication between regional utilities. Already several important import-export contracts have been concluded.

As the most developed electricity supply industry (ESI) in the region, South Africa is playing a major role in the development of the SAPP. Since the establishment of national utility, Eskom, in 1923, South Africa has enjoyed a highly-reliable, sophisticated electricity supply at prices which are among the lowest in the world.

Yet even South Africa`s ESI has to correct a major shortcoming – the provision of electricity to the black residential sector. A country-wide electrification programme has seen the proportion of `electrified` households rise from a low of 32 per cent in 1990 to nearly 75 per cent today.

White Paper

In December 1998 the minister of minerals and energy put forward a White Paper on Energy in Parliament. The document envisages an ESI that is financially viable, technically healthy and well-managed. It says that the industry should be capable of supporting growth, development and prosperity for South Africa at the least cost to the consumer and the country.

The key components of the ESI policy are:

•Restructuring of the distribution sector into a relatively small number of regional distributors

•Electrification of as many consumers as possible where this makes economic sense

•The establishment of a national electrification fund to fund electrification on budget from a dedicated electrification levy

•The introduction of a national electricity tariff system

•Government commitment to reasonable measures to progressively realise universal household access to electricity

•The meeting of growth in national electricity demand by applying the principles of integrated resource planning

•The future restructuring of the ESI into separate generation and transmission companies

•The further development of the SAPP.

The long-term vision for the ESI is:

•To rationalise the distribution component and eventually the generation and transmission components

•To introduce competition in the industry, especially in the generation sector

•To promote open, non-discriminatory access to the transmission system

•To encourage private-sector participation in the industry.

Privatization

The White Paper calls for the privatization of Eskom. We welcome the White Paper as it provides a framework within which the organisation can continue to do its business.

The minister for public enterprises says the privatization of Eskom`s core business (electricity supply) is not an issue. Activities which are not core, such as the telecomms network, could be viewed for change. Some industry commentators feel that generation, transmission and distribution should be held as one asset base to leverage borrowings. Competition could be created without unbundling, and Eskom has good economies of scale so unbundling is not indicated at present. As long as Eskom has surplus generation capacity, competition is problematic for newcomers, so opening up the industry to competition should wait until the surplus is used up. Present guesses are that surplus capacity could last until 2007/8.

Beyond the borders

Eskom is now adopting an `Africa focus` for two reasons. Firstly it needs to adopt a `regional-friendly` approach, to ensure stability in the southern African marketplace. The second is that Eskom has looked inward to South Africa for 70 years, and this was not the best policy. The `founding fathers` envisaged that Eskom would look outwards, as with the Victoria Falls Power company, an early company absorbed by Eskom, but this focus was stopped by the politics of the time. Now there is an opportunity that should be grasped.

Eskom feels that 50 per cent of its future investment should be beyond the borders of South Africa, and should produce a $200 million return. To make this a reality, it must select strategic partners who can help achieve this.

Eskom is involved in a number of long term projects, all of them involving massive capital investment. In the Democratic Republic of Congo (DRC), Eskom would like to take part in the refurbishment and expansion of the Inga hydroelectric scheme on the Congo river, a project that will probably take place over a 15 to 25-year period.

Eskom is involved in projects to build transmission lines linking the DRC with countries such as Zambia, Zimbabwe and Kenya. There are also plans for a main transmission line down the western seaboard linking DRC with Angola and Namibia. The Motraco project linking Mpumalanga and Swaziland with the Mozal smelter in Maputo is well on track. Further afield, there are proposals for projects in Ghana and Nigeria, potential for electrification in Liberia and a possible joint venture in Tunisia.

So there is potential for activity in the region but much remains to be done. The ESI has a long and proud tradition of enabling economic growth in the past, and clearly must have a pivotal role in the future.