Electricity in South Africa – A Chronological Assessment

Matthew R. Meas

I. Introduction

Electricity is undoubtedly the lifeblood of industry. While numerous models exist for the

structuring of an electricity supply industry, failure in the structure will always lead to dire social and

economic consequences for that country. Although the government is not calling it one, many

people believe that South Africa’s electricity supply industry is in crisis. This paper reviews the

history of the electricity supply industry in South Africa, focusing in particular on the transformation

during the political revolution, and the consequent lack of policy coherence that led to the 2008 load

shedding and the persistent lack of supply capacity thereafter. The current supply situation is

outlined in the context of the measures taken to ameliorate the supply shortages and opportunities

not realised. Additional short-term solutions are considered, including the accelerated introduction

of private generators employing renewable energy, and the long term prospects evaluated for the

improvement of the industry.

II. History of the South African electricity industry (Eberhard, 2007)

In 1897 the Rand Central Electric Works built the first commercial central power station in South

Africa. The foremost purpose of the plant was to supply the gold mines around Johannesburg. As the

country became more industrialised, the government assumed an increasing role in the electricity

supply industry (ESI), gradually acquiring private electricity supply operations, whose existence it

considered to be suboptimal for development. These events culminated in the passing of the

Electricity Act, No 42 of 1922, which created The Electricity Supply Commission, controlled by

commissioners appointed by the Minister, and the Electricity Control Board. ESCOM was given the

legislative authority to establish operations for the generation and distribution of electricity. The

commission repaid its early loans from government and had to raise capital through the issuing of

bonds thereafter. ESCOM was exempt from corporate income tax and was to supply electricity at the

lowest possible cost, making neither a profit nor a loss. Although electricity supply undertakings in

other municipalities did not require a license from the ECB, the Provincial Administrator was

required to launch an enquiry to ESCOM on whether its operations would be more cost-effective. As

a result, the jurisdiction of ESCOM extended to Durban, Cape Town, and other towns. In 1948

ESCOM secured control over the majority of the power stations as well as the high-voltage

transmission lines, when it purchased the largest private producer, the Victoria Falls Power

Company. By 1973, the transmission grid had been interconnected and was nationally controlled. So

the structure of the South African power sector came resemble that of many other countries in the

early 20th century, with ESCOM the unchallenged organisation integrating the complete value chain

from generation through distribution.

In order to meet the rapidly growing demand for electricity, new power stations were built,

mostly concentrated in the north-east of the country, and situated immediately adjacent to privately

owned coal mines which entered into long-term supply contracts with ESCOM. The growth in

demand was exacerbated by the oil shocks of the 1970s, as the economy was progressively

electrified, resulting in reserve margins as low as 11% in 1975. Furthermore, the unprecedented

engineering challenges encountered in increasing the scale of boiler designs and the effective use of

low-grade coal, compounded the concerns of power shortages amongst the planners at ESCOM,

causing them to order even more power stations (Eberhard, 2007). However, financing new assets

was becoming increasingly unaffordable, and the Electricity Act was consequently amended in 1971

to allow ESCOM to accumulate a Capital Development Fund from increased retained earnings

approved by the State President. Substantial price increases ensued, which troubled the

stakeholders and eventually led to a government enquiry by the De Villiers Commission, in 1983. The

Commission criticised the management, planning, and bookkeeping at ESCOM. Following the

recommendations of the Commission, the Electricity Act was amended in 1985, and replaced by a

new Act in 1987. ESCOM was renamed Eskom in accordance with the new Eskom Act of 1987 and

the Capital Development Fund replaced with standard business accounting practices. The previous

governance structure was replaced with a new two-tier corporate structure, which would require a

permanent executive management board to report to an Electricity Council representing major

electricity consumers, government, and municipal distributors. The Act replaced Eskom’s previous

mandate with the directive to “provide the system by which the electricity needs of the consumer

may be satisfied in the most cost-effective manner, subject to resource constraints and the national

interest.” and effectively transferred responsibility of regulating tariffs from the ECB to the

consumer-dominated Electricity Council (Eberhard, 2007).

To reduce the impact of the impending excess capacity due to their over-planning, Eskom

cancelled plans for new power stations, delayed the construction of others, and decommissioned or

mothballed older plant. Eskom lowered previous demand growth projections of 7% and promoted

load growth, offering low-cost electricity contracts to energy-intensive users, particularly those in

the in the beneficiation of aluminium and Ferro-chrome for export. Many vertically-integrated

electricity monopolies experienced similar cyclical overbuild and contraction during the 1970s and

1980s. While expansion projects presented little risk to investors or managers of state owned

enterprises, as debt was guaranteed by the state and the costs were borne by electricity consumers,

investments were infrequent and had long lead-times. They were often discontinued when

projected growth rates were not realised, requiring an arduous balance between mitigating short

term overcapacity and planning for future demand. When need for new capacity arose, higher

electricity prices would inevitably be necessary to finance the investment, yet consumers would

have grown accustomed to low tariffs based on the value of the previous generation of capital that

had largely depreciated. New investment frameworks were thus explored, and the government

commissioned the first privatisation study of the utility, which Eskom conducted in 1988. The state

was reviewing the performance of state owned enterprises at the time, and it had identified a need

to attract foreign direct investment. The study analysed several options and concluded that it would

be possible, and indeed preferable to privatise Eskom in its entirety, without introducing

competition, though the proposals were quietly abandoned in light of the uncertain political

circumstances at the time. The democratic revolution of 1994 unexpectedly renewed interests in the

liberalisation of the state-owned enterprises, and several were either privatised, or subjected to

corporate shareholder performance contracts. Throughout the world, outmoded state-owned,

vertically-integrated electricity supply industries were being restructured into unbundled,

competitive industries (Eberhard, 2007). Awareness was increasing amongst shareholders and the

focus would eventually return to Eskom. In the words of Eberhard (2007) “Change was becoming

inevitable.”

III. Primary precursors to the load shedding of 2008

When the ANC came into power, the desire of the new government to articulate their

position concerning energy led to the writing of the 1998 White Paper on Energy, which served as

the official proposal for the restructuring of the ESI. A major concern at the beginning of the 1990s

had been inequality of access to electricity and the plethora of small, financially inviable municipal

distributors (Eberhard, 2007). To address these issues, Section 7.1.3.3 proposed the formation of

Regional electricity distributors, stating that “Government will consolidate the electricity distribution

industry into the maximum number of financially viable independent regional electricity distributors

(REDs).” Section 7.1.4.4 of the 1998 White Paper proposed the establishment of the National

Electrification Fund, at the recommendation of the EDRC, stating that “Government will establish a

National Electrification Fund to provide electrification subsidies.” Section 7.1.5.8 called for the

facilitation of non-utility generation, stating that “The entry of multiple players into the generation

market will be encouraged” (Department of Energy, 1998).

The 1998 White Paper effectively set the stage for subsequent legislature designed to

facilitate practical, methodical restructuring of the ESI. To this effect, several bureaucrats and

representatives from Eskom and the NER assembled at a Ministerial Workshop in April 2000 and

agreed upon a draft policy paper outlining the restructuring the ESI. Eskom’s management were

initially alarmed at the extent of the proposals, which sought to reduce Eskom’s share in generation

market to 35%. However, in March 2002, broad consensus was reached on the next steps of the

“managed liberalisation process” approved by Cabinet in May 2001. The process would require

Eskom to retain no less than 70% of the existing electricity generation market. The remainder was to

be privatised and an initial 10% transferred to black economic ownership by 2003. An independent,

state-owned Transmission Company was to be established to vertically unbundle the industry and

ensure equal access to the transmission lines. Moreover, a new electricity market framework was to

be established based on multiple market models in order better distribute both physical and

financial risk, by diverse platforms for transactions between generators, traders and buyers, such as

bilateral contracts and power exchange. The power exchange was to be supported by a transparent

and independent governance mechanism, with a regulatory framework for ensuring the

participation of Independent Power Producers (IPPs) and the use of a range of primary energy

sources (Eberhard, 2007). In 2007 the Department of Energy announced their intention to table a bill

during the 2012 Parliamentary session to establish an Independent System and Market Operator

(ISMO). Eskom would cede transmission and distribution of electricity to the ISMO, who would enter

into purchase agreements with generators and supply agreements with municipalities according to a

rationalised tariff structure (Lloyd, 2012). While these reform steps were confirmed in March 2004,

the target dates were also significantly delayed, with a partial divestment Eskom’s generation assets

that had been scheduled for 2003 deferred around 2007 (Eberhard, 2007). Discussions relating to

the ISMO bill were continuously stalled, prior to its official withdrawal at the 2015 annual ANC

lekgotla (Paton, 2015).

The National Electrification Forum (NELF) advocated the accelerated electrification

programme which increased the proportion of households with access to electricity from one third

in 1993, to nearly 70% in 2000 (Marquard, 2006). A fundamental concern of stakeholders

represented in the NELF was the restructuring of the electricity distribution industry (EDI) to make

distribution financially viable and ensure that the EDI would be able to facilitate their ambitious

national electrification programme (Eberhard, 2007). While the unions shared these concerns, larger

urban governments that had reaped financial benefits from electricity sales did not, and feared

losing the additional revenue. The Board of the NER weighed rationalisation of the EDI through its

licensing process against further legislation from government and decided on the latter. After a

longwinded and controversial development, revision and relaying process their proposal, which

suggested consolidation of the EDI into an optimal number of financially viable and independent

Regional Electricity Distributors, or REDs, was approved by Cabinet in May 1997. In June 1999,

Cabinet agreed that six REDs were optimal, and that a publicly-owned, national EDI Holdings

Company should be founded to facilitate their creation. Defining the boundaries of the REDs proved

problematic, which led to the appointment of a consortium led PriceWaterhouseCoopers (PwC) in

early 2000. The group produced an exhaustive list of working papers, yet the EDI Holdings Company

formed more than a year after the decision, and the REDs had still not been created by

2007(Eberhard, 2007). Unsuccessful attempts to form the REDs were abandoned after 15 years,

during which they claimed a total R1.2 billion in consultants, summits, committees. A Cabinet

decision in 2010 confirmed that the REDS are dead, and Eberhard (2012) suggests that the reason is

clear. Electricity distribution is constitutionally described as a local government function and

although numerous municipalities initially cooperated in restructuring of the EDI, they objected

when ultimately instructed to cede their lucrative operations. The proposed amendment which

would have allowed their functions to be transferred to national government was soon withdrawn

when it became apparent that it would not be passed in the National Assembly, yet the Cabinet

decision to abandon the REDs model suggested no alternative. The National Planning Commission

subsequently proposed a plan to control the seemingly unmanageable scale and complexity of the

challenges facing the EDI could be mitigated using the Pareto principle, allowing 80 per cent of

municipal distribution to be improved with 20 per cent effort directed at our twelve cities. The

valuable plans made by EDI Holdings should be swiftly resurrected and the transferral of assets

considered in the few anomalous situations where Eskom still supplies city customers. Conversely,

the small rural municipalities that have difficulty providing a sustainable electricity service would

very likely enter into service delivery agreements with either Eskom or neighbouring metropoles, but

this requires definitive support from government (Eberhard, 2012).

The call for private generators to enter the supply did not proceed as envisioned, as could

have been anticipated considering the frequent disagreement and rescheduling of the “managed

liberalisation process.” With no contractual assurance of reasonable return on investment, private

industry simply could not rival Eskom’s cost and capacity, lest tariffs rise to international levels

(Lloyd, 2012). In addition to the proposed unbundling of Eskom, Cabinet issued a mandate in April

2001 explicitly stating that “Eskom [would] not [be] allowed to invest in new generation in the

domestic market… to ensure meaningful participation of the private sector in electricity in the

medium term” (DME Cabinet Memorandum April 2001, as cited in MAPS 2014). This effectively

transferred decisions regarding new build from Eskom to government, and despite projections that

new capacity would be necessary by 2007, Eskom was not permitted to build the capacity to meet it

(Marquard, 2006).

A public alert was issued in July 2004 warning of potential load shedding. Load shedding is

strategically applied by Eskom to prevent total collapse of the national grid in times when the

available generation capacity cannot safely meet the demand for electricity. However, it is the last of

several ancillary measures, which includes the National Control Centre calling upon the demand

market participation customers to reduce their loads by prearranged contractual amounts. If the

reduction is insufficient, supply to customers on interruptible tariffs may be interrupted for a limited

duration. Once these options have been exhausted, the National Control Centre will then assess the

shortfall and request Eskom Regional Control Centres to temporarily terminate supply to

predetermined loads such that the balance is restored to the national grid. A Southern African

Power Pool emergency is also declared, so that partners with spare capacity can assist in limiting the

extent of the disruptions (NERSA, 2008). No independent power producers had been contracted by

2004 and Eskom was still prohibited from investing in new capacity. Since Eskom had shut down the

department responsible for building new power stations, lead times on large stations were

anticipated to be longer, at around 9 years and low reserve margins would complicate supply-

demand balancing. Cabinet consequently lifted the decree that had excluded Eskom from investing

in the new-build programme in October 2004, and tasked Eskom with leading the procurement of

new generation capacity. Moreover, it was clear that unless demand growth was considerably lower

than expected, the new build would mitigate, but not prevent the upcoming supply shortages

(MAPS, 2014). In 2008, Minister Trevor Manuel explained that previous public expenditure had

predominantly subsidized the extension of supply, as opposed to financing the utility (Public

Protector, 2008). However, the electrification programme cannot be used to excuse the lack of

capacity, as it has since been shown that it was in fact inflicted by incoherent policy. Bearing in mind

that the largest consumers of electricity are not residential, industrial users, most forecasting of

industrial loads alone would have, and had indeed, signalled the impending supply shortage

(Eberhard, 2007).

The 2008 investigation of the National Energy Regulator of South Africa (NERSA) into the

load shedding of 2008 revealed that maintenance scheduled for January 2008 exceeded that allowed

by the operating reserve requirement by approximately 2000MW. Moreover, the actual unplanned

outages were abnormally high, and regularly exceeded 4000MW in January 2008, often requiring

pre-emptive load shedding to preserve the integrity of the power system. The opportunities

available to shutdown plant for planned maintenance meant that Eskom’s usual maintenance

procedures could not be effectively applied. Eskom adopted the 90/7/3 (Capacity balance Installed =

Available/in planned maintenance/in unplanned maintenance) operating philosophy in the early

1990s, when the reserve margin was comparatively large. Since then there has been an increase in

frequency and severity of unplanned outages, mostly due to boiler tube leaks, which occurred more

frequently when was operated at emergency generation levels and the quality of coal was poor. The

boiler tube leaks accounted for over 20 percent of the unplanned capacity loss during the inquiry

period. While gas turbines were inoperative on seven occasions due to lack of fuel, this had

relatively low effect on the rate of unplanned outages. However, more fuel oil was used during the

inquiry period than would otherwise be used in a calendar year. The increasing rate of planned

outages despite a decreasing reserve margin was predominantly caused by longer outages needed

for the comprehensive mid-life refurbishment of older plant, including Arnot. Yet, the investigation

identified a lack of coordination between the financial, resource and operational plans necessary for

effective maintenance procedures, and a tendency for Eskom to treat symptoms through minimum-

time maintenance instead of addressing the underlying causes through effective, maximum-benefit

maintenance. It was found that Eskom exported 765MW more power to neighbouring countries

during the load shedding period than was obligated by firm contractual requirements. Imports

totalled 850MW, whereas exports exceeded imports by 469MW during the period under

consideration. The NERSA (2008) investigation also revealed that inconsistent coal quality and wet

coal led to uncontrollable combustion, increased component wear, and coal handling problems

which caused load losses as great as 3000MW. As a result of low coal stockpile and high rainfall

coupled with the large number of unplanned generator trips and high planned maintenance, the

System Operator had no realistic alternative to load shedding.

IV. Managing the electricity supply shortage

Research conducted at the University of Cape Town indicates that the tendency for developing

countries to follow industrialised countries in unbundling their electricity supply industries with the

objective of establishing a structure resembling the standard market model often resulted in

incomplete restructuring and the emergence of a hybrid market model. The hybrid model is

characterised by coexistence of independent power producers, operating under long-term contracts,

a large state-owned utility, continuing to hold a significant-to-dominant share in the market (Nel,

2012). It is this hybrid market model which best describes the current electricity supply situation in

South Africa. On 24 January 2008, Eskom sent a letter to their customers requesting them to reduce

their load. The subsequent shutdown in the mining industry attracted much publicity to the fact that

Eskom could not guarantee supply (NERSA, 2008). However, the economic recession and the

corresponding demand decline initially helped to create space for a recovery. Eskom has since

rebuilt coal stockpiles and brought additional emergency capacity online. Demand Side Management

programme has also been implemented which has achieved energy savings and capacity from

Independent Power Producers and Renewable Energy Independent Power Producers has been

connected to the grid (Joffe, 2012). Eskom has twenty four operational power stations, of which

fourteen are large coal fired stations and made the decision to build the 4,800MW Medupi in 2005,

and were granted a license from NERSA in 2006. The construction of a further base-load station,

Kusile, started in 2008 and the first unit was expected on line in 2014 (Lloyd, 2012). However, these

have been delayed and while one unit of Medupi has been commissioned, construction on Kusile is

set to continue for a long time yet, as is the Ingula Pumped Storage Scheme (Creamer, 2015).

Reasons given for the delay in the construction of new generation capacity include difficulties in

completing environmental impact assessments on tribal land (Eskom, 2014). Unrest after a fatal

accident at the Ingula construction site caused significant delays (Eskom, 2014). Most of the coal

fired fleet is located on the site of coal mines with which they have long-term coal contracts. Eskom

also owns and operates the only nuclear power station in Africa, located at Koeberg, approximately

30 kilometres north of Cape Town, as well as three hydroelectric plants and two pumped storage

schemes used to meet peak demand and maintain control and balance of the system. Small,

municipal power stations and back-up gas turbines constitute approximately 5 per cent of the

national generation capacity with the approximately 2 percent remainder representing private

generators (Eskom, 2015). South Africa exports approximately 5.5 per cent of the total net electricity

produced to Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe. Approximately

3.6 per cent of the total electricity produced in South Africa takes the form of imports,

predominantly from the Mozambique Cahora Bassa hydro-electric station, the Democratic Republic

of Congo, and Zambia (Stats SA, 2014). Most of Eskom’s bulk electrical power is sold to large mining

and industrial customers, and to municipalities, accounting for more than 80 per cent of its revenue

and electricity sales, and a further 5.1 per cent consists of retail distribution services directly to

residential customers (Eskom, 2014).

In response to the 2008 load shedding, Government declared an electricity emergency and

formed the Government National Electricity Emergency Programme (GNEEP) led by a National

Electricity Response Team (NERT), to alleviate the crisis by drawing upon the collective efforts of

various industry stakeholders (NERSA, 2008). The NERSA, uncertain of their role in relation to the

NERT, put forth their recommendations to Eskom in their report from the investigation into the 2008

load shedding. The NERSA directed Eskom to monitor the match between the coal delivered and

burned and to continuously secure adequate stock levels to fuel power stations through periods of

copious rainfall and unforeseen events. However, Eskom failed to address the shortcomings in their

coal protocol. In their commentary on the NERSA report (2008), Eskom denied complacency in their

procurement of coal, and yet reported delivery of the incorrect grade of coal (Eskom, 2014).

The impact of the electricity supply shortages can be further ameliorated by the increased use of

renewable energy as supplemental capacity during periods of peak demand. While Eskom has

improved their maintenance procedures in the years following the 2008 load shedding incidents,

doing so has been difficult with reduced reserve margins (NERSA, 2008). If anything, the additional

capacity from renewable energy technologies should also substitute the capacity taken out of

service during maintenance procedures. Renewable energy technologies have shorter lead times

and significantly lower construction costs compared to conventional technologies (Lovins, 1976).

Furthermore, there is no fuel cost associated with fuelling renewable energy technologies. However,

the targets of the Eskom Renewable Energy Independent Power Producer Procurement Programme

(REIPPPP) are currently not being met (Eskom, 2014). The 2013/2014 target for total independent

power producer purchases was set at 4152 GWh, of which 3671 GWh was successfully secured

(Eskom, 2014). The current programme requires each application to be reviewed by the Minister of

Energy, in accordance with the Electricity Regulations on New Generation Capacity (Department of

Energy, 2011). This subjection of each application to ministerial judgement is ineffective, and hinders

a critical procedure which should be expedited in light of our current supply situation. The mandate

and decision-making procedure should be clarified and revised, such that the authority to make

informed decisions regarding applications through the independent power producer programme can

be extended to the commissioners appointed by the minister. NERSA should furthermore be

mandated to regulate tariffs with renewed intent and should hold all entities in the ESI and EDI

responsible to their contractual agreements. Additionally, partnerships with generators in Namibia,

Botswana and Mozambique will undoubtedly improve the outlook for the South African ESI in the

coming years, and we can learn from Europe’s experience that the introduction of renewable energy

is fostered by connections between regions (Lloyd, 2012).

Another untapped potential for reducing the impact of the electricity supply shortages is

cogeneration. The cost of rooftop photovoltaic panels continues to drop and commercial consumers

in major cities are investing in the technology despite the effective silence of South African electricity

policy regarding the topics of cogeneration and the wheeling of power into the grid. If cogeneration

were to be facilitated at attractive rates, private investigation in generation capacity may improve

more rapidly, and the increase in capacity would be favourable for consumers and the integrity of

the grid (Burkhardt, 2015).

V. Prospects for the electricity supply industry

The foremost short-term priority for the South African ESI industry should undoubtedly be

the establishment of an adequate reserve margin. Thereafter, additional prospects should be

considered to avoid the pitfalls of the past. In his Roadmap to a thriving Electricity Supply Industry in

South Africa (2012), Doug Kuni, MD of the South African Independent Power Producers Association

suggests renewed attempts at allowing private generators into the market, as these may help

alleviate funding problems that may arise during capacity expansions. Kuni continues,

recommending that municipalities be put under pressure to return all of their distribution

equipment to serviceable order, and that tariffs be regulated within affordable ranges to address the

backlog and facilitate this initiative. Acknowledging the large expenses involved in grid maintenance,

Kuni suggests that the Department of Energy Renewable Energy Independent Power Producer

Procurement Programme be merged with an accelerated off-grid programme in remote

communities. Lastly, Kuni laments the intricacy of the current ESI and calls upon Government to

establish a Permanent Electricity Commission (PEC) of professionals from international ranks, with

experience in successful power sector reforms, to be tasked with restructuring the regulatory

process. To this end, Kuni suggests that the PEC be tasked with producing future independent power

producers, immediate revision of the complete suite of legislative and regulatory documents to

achieve sufficient coherence that can facilitate participation from independent power producers,

and advising Government on future policy.

Though there exists no evidence to suggest that competitive market structure is necessarily

better than a monopolised, or hybrid market structure, the former may indeed be the better option

for South Africa. Many of Eskom’s power stations will be reaching the end of their lives, and will

have to secure funding for new generation capacity. However, it is anticipated that the utility will

have difficulty securing funding beyond what it receives from the National Treasury, as its long-term

credit BB+ rating was reduced to BBB- and eventually to sub-investment, or “junk” status in March

2015 (SAPA, 2015). This development could significantly limit the prospects for the development of

the South African ESI. While the precise position of a single network operator and its relation to

Eskom has been the source of much debate, the creation of an ISMO may become a necessity in the

future. As an alternative to Eskom agreeing to increasing debt to finance their new generation

capacity, the introduction of independent power producers should be better incentivised and the

purchasing of capacity staggered to compensate that taken off the grid from the decommissioning of

the current Eskom fleet. This would effectively change Eskom’s role from that of primary generation

supplier to that of owner and operator of the transmission- and some distribution infrastructure. As

operating the transmission lines in an equitable fashion is one of the functions of the ISMO, it

follows that there is a possibility that the ISMO could be established out of Eskom (Minister of

Energy, 2011). Should this come to pass, the power stations most recently added to the Eskom fleet

could then be privatised, and the proceeds of the sale invested into further reinforcement of the

transmission and distribution networks.

The recurring theme amongst the wealth of proposals for the future of the South African ESI

are a need for clear direction, adequate, stable supply and a grid that is robust and adaptable. Unless

the failing EDI is repaired, the market structure of the ESI is of little consequence. Similarly,

insufficient supply to meet the demands of the system would be detrimental to a well-functioning

grid. Therefore, the EDI and generation capacity should ideally grow concurrently, and not

independently, as it has and continues to today.

VI. Conclusion

The electricity supply industry in South Africa experienced much the same issues of overbuild and

subsequent contraction prior to 1994 and surplus generation remained after the political revolution.

In accordance with the 1998 White Paper on Energy, unbundling of Eskom was attempted through

the encouragement of private sector participation and restructuring of the electricity distribution

industry into six regional electricity distributors. The REDs failed, and the private sector did not

respond as anticipated. A temporary decree which prohibited Eskom from expanding supply capacity

caused a delay in the procurement of new capacity, which led to load shedding in 2008. The

recovery has not been without problems. The vast array of legislature and organisations set up to

enforce them and deal with the issue illustrates how the shortage is not a purely technical problem,

and that legislation alone is insufficient to address it. Much socio-political pressure is needed to

induce any substantial action, and a champion for the cause as well as a coherent suite of policy is

desperately needed. Better communication of information to the public is also needed to adequately

explain how the need for load shedding arises, and the measures that are implemented before

resorting load shedding. Recommendations have been made for ameliorating the supply shortages,

including the amendment of policy to allow for expedited introduction of REIPPPs and cogeneration.

While no evidence exists to suggest that competition is necessarily better, the need for restructuring

and re-appropriation of power in the ESI is apparent. Several power stations in Eskom’s existing fleet

will be nearing the end of their lives soon, and with their long-term credit rating recently reduced to

“junk-status,” Eskom will find it difficult to secure funding for new generation capacity. With the use

of appealing tariffs and tax incentives, it would likely be easier to attract private investors to finance

their own generation operations. To this end, it has been suggested that Eskom’s role be

transformed from that of the primary generation supplier to that of owner and operator of the

transmission system, with the additional responsibility of assisting struggling municipal distributors

to become financially viable. We hope that society can apply the political pressure as peacefully as it

has in the past. While competition may well be beneficial a unique solution is needed for the unique

problems that face the South African Electricity Supply Industry.

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