Energy

Andre de Ruyter and Harvard University share their views on Eskom

Former Eskom CEO Andre de Ruyter and The Growth Lab at Harvard University have strikingly similar views on resolving problems at Eskom and the country’s electricity crisis.

In his latest column in Rapport, De Ruyter bemoans that most state-owned enterprises are in a state of losses, disorder, corruption, and plunder.

He argues it is time for the state, as in the world’s most successful economies, to remove its fingers from the economic pie.

“There is no reason why the South African state should have such a large share in the economy,” he said.

“To pay off our debt, we must start selling our assets before they become worthless – ports, railways, state-owned enterprises.”

De Ruyter said the private sector is ready to invest and manage state-owned enterprises much more efficiently.

Western governments can unlock favourable financing, but we must make and implement difficult but pragmatic decisions.

“We need to make our policies market-friendly, tackle corruption, stay away from the red tape, and cut our belts thinner,” he said.

De Ruyter previously urged the government to lift restrictions on the private sector to supply electricity to the grid.

He also wanted Eskom to be exempted from preferential procurement policies, which caused delays in getting equipment and increased business costs.

De Ruyter’s view aligns with a recent report by The Growth Lab at Harvard University on how to fix Eskom.

The report, Growth Through Inclusion in South Africa, shared recommendations for strengthening state capacity and fixing the country.

The Harvard Growth Lab said the electricity crisis could be resolved through a few interventions that would fuel private participation in the sector.

They proposed creating a functioning market for electricity with the following principles:

  • Facilitate greater participation of society in the generation, transmission, distribution, and storage of electricity.
  • Create efficient distribution markets that are not too small to benefit from economies of scale.
  • Create clear rules for all market participants that eliminate conflicts of interest and prevent discriminatory treatment.
  • Use prices that reflect the marginal cost of production, including intra-day pricing.

They further proposed removing all preferential procurement requirements for the Renewable Independent Power Producer Programme (REIPPP).

The state should also use the programme design for investments in transmission and storage and include it in the next procurement window.

It further said the government should rent Eskom’s existing power plants to other operators, incorporating high incentives for efficiency.

Equally important is to enable new comparative advantage in green electricity through streamlined approval of renewable generation, transmission, and storage projects.

South Africa should also promote private green industrial zones powered by renewable energy to attract energy-intensive industries that want to decarbonise quickly.

The country should also explore pumped storage hydropower with Lesotho to facilitate the absorption of more renewable projects.

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